Kotak MF flags inflation and global rates as key risks, while Reuters-quoted economist Brian Jacobsen and former banker Ajay Bagga highlight the implications for markets and emerging economies
The US Federal Reserve’s 25-basis-point rate hike has triggered caution among economists and market experts, with persistent inflation, higher global borrowing costs and pressure on emerging-market currencies emerging as key concerns.
Deepak Agrawal, CIO – Debt & Head Products at Kotak Mutual Fund, said the rate hike was driven by elevated inflation and would help the Federal Open Market Committee restore credibility around its 2 per cent inflation target.
“Given the elevated inflation, the FOMC hikes rates by 25 bps and guided for one more hike in CY 2026,” Agrawal said. He added that the US economy was expanding at a solid pace, supported by productivity gains, robust capital investment and strong job gains.
Agrawal said the Fed’s dot plot suggests it could remain on hold through 2027, with easing potentially coming in 2028. He added that the Fed’s commitment to bringing inflation back to 2 per cent should support long-term bond yields.
For India, Agrawal said rising crude prices, inflation and higher global rates could influence the Reserve Bank of India’s monetary policy and “may also guide the India MPC to raise rates by 50 bps.”
Brian Jacobsen, chief economist at Annex Wealth Management, told Reuters that the Fed’s latest move could resemble either its 1994 or 1997 policy episodes, depending on what happens next.
More from Business“Warsh not only read the markets, but he read the room,” Jacobsen said, adding that the Fed’s language suggested another hike this year should not be taken for granted.
Former banker Ajay Bagga, in a post on X, flagged potential global spillovers from higher US borrowing costs. He said higher rates could weigh on capital flows, bond yields and emerging-market equities.
Bagga also said higher US rates were likely to support the dollar, putting further pressure on emerging-market currencies such as the Indian rupee, which is already under strain.
Michele Raneri, vice president and head of US Research and Consulting at TransUnion, told Reuters that the quarter-point increase reflected the Fed’s continued focus on persistent inflation.
While inflation has moderated from its peak, Raneri said it remains elevated enough to warrant further action, while resilient labour-market conditions have given policymakers confidence to raise rates.
