US CPI is at a 40-year high. Inflation worries in the US have been triggered by soaring gas prices, food and housing, which have made it jump 7.9 percent in the past year. Soaring crude prices are hurting inflation further. Since Russia is a major exporter of crude oil and gas, it is expected that Russia’s invasion of Ukraine will only make matters worse.
CNBC-TV18 caught up with Taimur Baig, MD & Chief Economist - Group Research, DBS Bank, and Steve Englander, Global Head of G10 Fx Research & North America Strategy, Standard Chartered Bank, to understand what this could mean for the global economy.
Englander allayed some of the inflation-related worries. He said that inflation is getting to levels where it won’t be sustainable. He explained that the dollar has been the most consistent safe haven throughout. According to him, the worst fear in the market is of skirmish spreading outside Ukraine.
He said, “The worst fear in the market is that the war not only intensifies in Ukraine but spreads outside the border of Ukraine and becomes something that affects the North Atlantic Treaty Organization (NATO) state or some other states and in that the global risk premia would go up massively if euro would fall well below parity.”
Baig, meanwhile, mentioned that India won’t be an exception to global inflation. Though he is convinced that India is much more capable of handling inflation now. Elaborating further, he said that he doesn’t believe it’s a situation of hyperinflation and stagflation. Additionally, he is of the view that the Reserve Bank of India (RBI) has an ample war chest now to combat inflation than it had in 2013.
He said, “India is no exception to global dynamic. We do have incipient inflation pressure in India; nothing like it was during the taper tantrum days, less than 10 years ago Raghuram Rajan had to fight vigorously the underlying inflation pressure and the pressure on the rupee. India is nowhere close to that sort of discomfort from its macro mix and its ability to take on the higher food and fuel inflation is substantially more now than it was then.”
(With inputs from AP)
For the entire discussion, watch the accompanying video
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