’Fasten seat belts worldwide’: More rate hike likely from US Fed, Uday Kotak explains

Billionaire banker, Uday Kotak expects more rate hikes from the US Federal Reserve as he sees signs of sticky inflation. Kotak believes the Fed rate hikes will be higher for a longer duration. The latest reading of US inflation slowed slightly to 6.4%, however, is lower than the street's expectations.

On Friday, the Kotak Mahindra Bank's managing director tweeted, "Global central bank balance sheets take huge losses as they bought long-term bonds and de facto printed money."

Who pays? Kotak indicated "sovereign".

Following this, Kotak said, "signs of sticky inflation in US. More interest rate hikes likely. And higher for longer."

He added lastly, "remember airplane turbulence? Fasten seat belts worldwide!"

In January this year, US inflation inched lower to 6.4% compared to the previous month's print of 6.5%. However, the latest inflation data came in less than market estimates of 6.2%. This sparked worries of longer than expected rate hikes from the US Fed and global markets reacted feebly.

It needs to be noted that the latest US inflation data is still the lowest since October 2021. Also, it has recovered sharply from the multi-decadal high of 9.1% in June last year.

But the inflation is still three times above the Fed's target of 2%.

According to Sonal Badhan, Economist at Bank of Baroda, US CPI data for Jan’23 came in at 6.4% versus estimates of 6.2% and 6.5% in Dec’22. In MoM terms too CPI was up (+0.5%) compared with 0.1% increase in Dec’22. Significant increase in clothing, medical care commodities, and transport services pushed inflation up on sequential basis. This has revived fears of elevated rates in the US for a longer duration of time.

Kotak is not alone in expecting more rate hikes.

As per a Reuters report on Thursday, two Federal Reserve officials said further interest-rate hikes will be necessary to ensure inflation returns to the US central bank’s 2% goal over time. Federal Reserve Bank of Cleveland President Loretta Mester sees a compelling case for another 50 basis-point interest-rate hikes which can be expected earlier this month. Meanwhile, Federal Reserve Bank of St. Louis President James Bullard urged for additional rate hikes to ensure disinflation continues.