Your loan EMI has a Washington problem: How the Fed quietly influences RBI decisions

Last Wednesday, the US Federal Reserve raised interest rates for the first time since July 2023. Thousands of miles away, sitting in your home which you have bought on loan, your EMI may take a hit.The US Federal Reserve’s quarter-percentage-point rate hike has added to the challenges facing the RBI ahead of its monetary policy review in October.“Global growth is projected to soften while inflation forecast is higher for 2026 vis a vis the previous year. Some central banks have tightened policy, while others remain vigilant. Crude oil prices, currencies and financial markets remain volatile, fluctuating in line with the changing intensity and uncertainties of the West Asia conflict,” RBI governor Sanjay Malhotra had said in the August review statement by the Monetary Policy Committee.Almost two months later, inflationary pressures on the economy have increased. And the US Fed’s rate hike signals tighter monetary conditions.