Uday Kotak warns of global turbulence after hotter-than-expected US inflation

Uday Kotak

Uday Kotak has warned of global turbulence after hotter-than-expected US inflation print in March eroded hopes of a rate cut by the Federal Reserve.

The Kotak Mahindra Bank founder, who stepped down as managing director and chief executive officer of the private sector lender in 2023, said higher US inflation and Brent crude oil at $90 will keep the interest rates higher globally, including in India.

He said the Federal Reserve could cut rates closer to the US presidential elections, which are due early November.

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 global turbulence.

— Uday Kotak (@udaykotak) April 11, 2024

US headline inflation in March spiked to 3.5 percent annually against 3.2 percent in the previous month, data release on April 10 showed. The surge ruled out possibility of a cut in the near term and sowed doubts about the extent of the cut, if any this year.

US treasury yields surged, while equities plunged after the data was released.

The Reserve Bank of India (RBI) maintained the status quo in its recent policy announcement in April, keeping the repo rate at 6.5 percent. The central bank sees headline inflation dropping to 4.5 percent in the FY25 raising spectre of a rate cut in subsequent policies.

Meanwhile, China's consumer inflation cooled more than expected in March, while producer price deflation persisted, maintaining pressure on policymakers to launch more stimulus as demand remains weak.