"Get ready for global turbulence", warned Uday Kotak, founder and non-executive director at Kotak Mahindra Bank after US posted higher than expected inflation rates.
Kotak tweeted on X (formerly Twitter), that the latest rise in US inflation, coupled with brent crude prices rising to $90 and the possibility of the US Federal Reserve postponing rate cuts till closer to the US presidential elections, could have global repercussions.
The former managing director and chief executive officer of the private sector bank then added the the circumstances "Will keep rates higher for longer worldwide including India".
The only "wild card" would be China, said Kotak due to its imploding economy.
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.
US Inflation Data
The tweet came after the US released its latest inflation data on Apr 10, which showed that US consumer prices rose more than expected in March. The consumer price increases were mainly propelled by surging gas prices, rents and car insurance.
The US consumer price index (CPI) rose 0.4% month- on- month in March 2024. March CPI inflation was at 3.5% on a year- on- year basis, up from the 3.2% year- on- year in February. This marked the thirds consecutive month that US inflation data surpassed the US Federal Reserve's target of 2%
The report further shifted traders' expectations for the first full quarter-point rate cut of 2024 from September to November.
Chinese Economic Data
China's factory activity in March beat expectations, boosting optimism that the country's industrial sector is building momentum for an economic recovery and that the China could be on track to achieve its growth target of around 5% in 2024.
The Caixin manufacturing purchasing managers' index rose to 51.1 on April 1, standing above "50 mark" which indicates expansion for a fifth month, the longest streak the Chinese economy has had in more than two years.
Government data published on March 31, saw the manufacturing PMI in March snap a five-month contraction and rise to the highest in a year. Both numbers beat market expectations, adding to evidence that the country's industrial sector is building momentum for an economic recovery.
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