'US rate cuts to happen later, closer to US Presidential elections': Uday Kotak reacts on hot US inflation numbers 

Reacting to the recent US inflation figures, Uday Kotak warned of global turbulence and rubbished possibilities of a rate cut by the Federal Reserve anytime soon. He predicted that the rate cut in the US could happen closer to the US Presidential elections.

The CPI, which measures goods and services costs across the economy, rose 0.4% for the month, putting the 12-month inflation rate at 3.5%, or 0.3 percentage points higher than in February, the Labor Department’s Bureau of Labor Statistics reported. The consumer price index in the US accelerated at a faster-than-expected pace in March, pushing inflation higher. 

The US inflation numbers for March 2024 surpassed expectations, led by rising petrol and shelter costs. This surge dampened prospects for a June interest rate reduction by the US Federal Reserve. The consumer price index (CPI) climbed 0.4% sequentially, exceeding Wall Street predictions.

The Kotak Mahindra Bank founder said higher US inflation and Brent crude oil at $90 will keep the interest rates higher globally including in India.

"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," Kotak said in a post on X. 

US stocks slumped on Wednesday after the release of the inflation data, with Dow falling by more than 500 points. The S&P 500 lost 1% and the Nasdaq Composite fell by 1%.

“You can kiss a June interest rate cut goodbye,” Greg McBride, chief financial analyst for Bankrate, wrote in commentary issued Wednesday.

“The headline number was expected to go up because of energy prices, but the fact that core came in hotter than expected is a real bummer,” Tyler Schipper, assistant professor in economics and data analytics at the University of St. Thomas in Minnesota told CNN. 

″This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip,” said Seema Shah, chief global strategist at Principal Asset Management. “In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”

In the recent days, multiple Fed officials have expressed skepticism about lowering rates. Atlanta Fed President Raphael Bostic told CNBC that he expects just one cut this year, likely not coming until the fourth quarter. Governor Michelle Bowman said an increase may even be necessary if the data does not cooperate.