Is the world economy about to undergo a major turbulence? Veteran banker and founder of the Kotak Mahindra Bank, Uday Kotak seems to think so.
In a recent tweet, Kotak pointed out that the US inflation figures were also going north, and this has pushed the Federal Reserve to postpone a potential cut in the interest rate.
"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," the veteran banker said on X.
On Wednesday, Reuters reported that the likelihood of a Federal Reserve interest-rate cut before the end of summer, or at all this year, faced a significant setback following another U.S. inflation report. This report highlighted the persistent nature of price pressures throughout the US economy.
Previously, attention had been focused on June as the potential start of Fed policy easing. However, with a third consecutive stronger-than-expected reading on consumer inflation, traders are now shifting their expectations to the Fed's mid-September meeting for an initial rate reduction. This unexpected data sent financial markets into a rapid retreat.
Moreover, geopolitical uncertainities have become acute following the growing crisis in the Middle East, which is already reeling from the ongoing war between Israel and Hamas. Tensions have escalated in the region following Iran's pledge to seek retaliation for the April 1 airstrike targeting its embassy compound in Syria's Damascus. The attack resulted in the death of a prominent Iranian general and six other military officers. Iranian Supreme Leader Ayatollah Ali Khamenei emphasized on Wednesday that Israel "must be punished," although Israel has not officially claimed responsibility for the April 1 attack.