Moneycontrol Pro Panorama | A warning message from the US Fed

US Federal Reserve

Dear Reader,

The US Federal Reserve, the world’s most influential central bank, has rung a warning bell on the Iran war. The war is casting a shadow over its fight against inflation, with new projections pointing to rising US inflation expectations.

US stocks fell and equity markets in India and Asia opened with losses on Thursday. Apart from reacting to the Fed's comments and projections, the bombing of Iran's gas fields followed by retaliatory attacks on Qatar's and UAE's gas infrastructure also hurt sentiment.

The future course of Fed action is now tied to the Iran war, specifically when it comes to determining the inflation trajectory. This is not a welcome scenario for markets. The fear is that the Iran war can keep prices higher for longer.

The war in the Middle-East is into its third week and there are no signs of letting up on either side. Damages to energy infrastructure in the region means fuel prices can remain high for longer duration. This is stoking inflation globally and can keep the US Federal Reserve in a wait-and-watch mode on monetary policy and interest rate cuts. The US central bank left its interest rates unchanged on Wednesday.

“The absence of a policy bias seems to be the message, and it is likely that the Fed will be on an extended pause till more clarity emerges around the effects of the Iran crisis (and fading tariff inflation),” warn economists at Emkay Global Financial Services.

Elevated energy prices, rising US bond yields and global economic uncertainty does not augur well for India and emerging markets.

Compared to the US, inflation in India is more sensitive to changes in oil & gas prices due to higher dependency on imports, writes Anubhav Sahu.

If the current scenario persists for longer duration, then inflation in India can perk up, putting constraints on Reserve Bank of India’s (RBI) monetary policy. Note that the rupee is already under pressure. The RBI’s Monetary Policy Committee is scheduled to meet on April 7-9, 2026.

Tail-piece

India's markets were also taken by surprise by news of the resignation of part-time chairman of HDFC Bank Atanu Chakraborty over “certain happenings and practices” that were “not in congruence with my personal Values and Ethics”.

The RBI issued a statement on HDFC Bank saying there are “no material concerns” on the bank’s conduct or governance. The bank also held a conference call with investors to address their concerns and said there were no “major issues” at the bank.

Meanwhile, Chakraborty told NDTV Profit that he's not pointing out any wrongdoings at the bank, and his decision was owing to the fact that their ideologies did not match.

Still, the abrupt resignation of Chakraborty has come as a negative surprise. The HDFC Bank stock is down 3.7 percent in Thursday trading at 1.20pm and is among the major losers in the Nifty 50 index.

While clarity on the issues raised by Chakraborty will be awaited, the sudden resignation of the outgoing chairman points to deeper issues at the bank that led to it being mentioned in formal communication, writes Dinesh Unnikrishnan. Do read his Quick Take on the issue.

Investing insights from our research team

Hotel sector: Which stocks to prefer amid war worries?

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Zen Technologies offers strong revenue visibility

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Quick Take | HDFC Bank’s unsettling governance moment

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Rupee’s weakness is because of challenges on the balance of payments front

Ironically, Iran and Israel have the same aims, prolong the war. US is stuck

India’s $10 trillion ambition needs foundations that must be built today

The silent strength of India’s public sector banks

The Silent Inflation Driver: How extreme weather is transforming India’s food economy

Naveen Babu forms Biju Naveen Trust, says no connection with BJD

Safe commutes key to unlocking women’s manufacturing workforce participation

Markets

Is oil reaching a tipping point? Oil markets signal deeper supply shock as physical prices diverge from futures

Technical Picks: ONGC, VEDL, NAVINFLUOR, BAJAJ-AUTO

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