3%, the highest level seen since 2007, as geopolitical tension in the Middle East and a surge in crude oil prices revived inflation fears. The rise also reflects growing concerns over the United States' expanding fiscal deficit and the prospect of higher long‑term borrowing costs for the federal government. Global investors quickly priced in the rate hike, prompting a sell‑off in risk‑off assets and a rally in short‑term US Treasuries.
For emerging markets like India, the spike translates into higher external borrowing costs and puts pressure on the rupee. 6% on the news, while foreign institutional investors trimmed exposure to Indian equities, favouring safer havens. Indian bond fund managers are now favouring shorter‑duration instruments to shield portfolios from a steepening yield curve.
2%, prompting retail investors to reassess fixed‑income allocations. The RBI has signalled that it will monitor the situation closely but is unlikely to intervene unless the rupee weakens sharply. Investors should keep an eye on US inflation data, oil price movements and RBI policy cues, as they will shape the cost of credit and equity market sentiment in India.