Uday Kotak, the founder and non-executive director at Kotak Mahindra Bank, has cautioned about the possibility of prolonged higher interest rates worldwide, including in India.Taking to X (formerly Twitter), Kotak highlighted that the recent surge in US inflation and rising oil prices, coupled with the postponement of rate cuts by the US Federal Reserve, could have repercussions globally.Kotak warned: "Only wild card: China imploding economically.
Get ready for global turbulence.
"Kotak's remarks follow closely on the heels of the latest US inflation data released on April 10, which revealed persistent consumer price increases fueled primarily by surging gas prices, rents, and car insurance.
However, challenges such as swelling US crude stockpiles and the recent uptick in US inflation pose formidable obstacles, potentially delaying Federal Reserve rate cuts.In its last Monetary Policy Meeting, India's Reserve Bank kept the key lending rate (repo rate) unchanged at 6.5% for the seventh consecutive time .
He said it was important to ignite the 'animal spirit' within the economic sphere and advocated for a proactive stance towards investment and expansion sooner rather than later.
Uday Kotak, the founder and non-executive director at Kotak Mahindra Bank, has cautioned about the possibility of prolonged higher interest rates worldwide, including in India.Taking to X (formerly Twitter), Kotak highlighted that the recent surge in US inflation and rising oil prices, coupled with the postponement of rate cuts by the US Federal Reserve, could have repercussions globally.Kotak warned: "Only wild card: China imploding economically. Get ready for global turbulence."Kotak's remarks follow closely on the heels of the latest US inflation data released on April 10, which revealed persistent consumer price increases fueled primarily by surging gas prices, rents, and car insurance. The report showed core prices rose by 0.4% from February to March and a year-over-year increase of 3.8%, marking the third consecutive month of inflation readings well above the Fed’s 2% target.The hotter-than-expected inflation figures could put the Federal Reserve in a dilemma, as policymakers grapple with the timing and magnitude of potential interest rate cuts. Despite earlier projections indicating multiple rate reductions in 2024 , recent indications from Fed officials suggest a reluctance to swiftly adjust the benchmark rate, citing the robust state of the economy.Notably, the March projections by Fed policymakers, anticipating three rate cuts for 2024, have faced scepticism, with a growing number forecasting fewer reductions. Some economists still expect a rate cut by June or July, although uncertainties loom large.Adding to the economic complexities are soaring oil prices , with Brent futures surpassing $90 and West Texas Intermediate hovering near $86 after a 1.1% surge on April 10.Geopolitical tensions and OPEC+ supply cuts have propelled oil prices upward by approximately 17% this year. However, challenges such as swelling US crude stockpiles and the recent uptick in US inflation pose formidable obstacles, potentially delaying Federal Reserve rate cuts.In its last Monetary Policy Meeting, India's Reserve Bank kept the key lending rate (repo rate) unchanged at 6.5% for the seventh consecutive time . The repo rate is the rate at which the central bank lends to commercial banks.During a CNBC-TV18 India Business Leader Awards (IBLA) red carpet event in December 2023, Kotak had said the 6.5% rate, he believed, was sustainable for the foreseeable future, assuming external factors remain favourable. The RBI has maintained India's fiscal year 2025 GDP growth target at 7%.At the IBLA event, Kotak also expressed his optimistic view regarding India's economic path and added it was an opportune moment for the private sector to increase expenditure. He said it was important to ignite the 'animal spirit' within the economic sphere and advocated for a proactive stance towards investment and expansion sooner rather than later.
