Renowned banker and Kotak Mahindra Bank founder, Uday Kotak, has issued a stark warning about the potential for turbulence in the global economy.
Kotak's cautionary remarks come in light of several concerning developments, including unexpected levels of inflation in the United States and growing economic instability in China.
In a recent statement posted on platform X, Uday Kotak posted on platform X, “US Inflation is higher than expected. Postpones US rate cuts to later, closer to US Presidential elections, if at all. Brent oil now $90 will keep rates higher for longer worldwide including India. Only wild card: China imploding economically. Get ready for the global turbulence”.
He highlighted the repercussions of higher-than-anticipated inflation in the US, suggesting that it could disrupt expectations for rate cuts by the US Federal Reserve.
The latest policy review by the US Federal Reserve indicated a belief among officials that the key interest rate had likely peaked. However, they suggested a gradual easing of the monetary policy stance later in the year if economic conditions align with their projections.
Adding to the concerns, US rating agency Fitch also downgraded China's sovereign credit rating from stable to negative, citing heightened risks to its public finances. This downgrade follows a similar action by Moody's in December, reflecting growing apprehensions about China's fiscal stability.
Recent data from the US Labor Department's Bureau of Labor Statistics revealed a notable increase in the Consumer Price Index (CPI), surpassing market expectations. Core inflation, closely monitored by the Federal Reserve, also exceeded forecasts, fueling doubts about the timing and extent of future rate cuts.
Economists now anticipate that the Federal Reserve may postpone rate cuts in June due to persistent inflation and a resilient US economy.
Such a delay could have adverse implications for emerging markets like India, potentially triggering fresh outflows of foreign capital.
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