Market participants are recalibrating their expectations for US monetary policy, with the likelihood of multiple Federal Reserve rate hikes this year rising sharply.
Just a week ago, traders had priced in a high probability of at least three rate increases, with the first move anticipated in September.
This shift comes as inflation data remains persistently above the central bank's target, complicating the outlook for global liquidity.
The reassessment of Fed policy has immediate implications for emerging markets, particularly India.
Analysts warn that a more aggressive tightening cycle, including the possibility of a 50-basis-point rate increase, could exert significant downward pressure on Indian equity markets.
Such a move would likely strengthen the US dollar, triggering capital outflows from emerging economies and increasing borrowing costs for Indian corporations and consumers.