Latest news with #ClaudioIrigoyen
Mint
2 hours ago
- Business
- Mint
US in stagflationary shock, India remains outlier, says BofA's Claudio Irigoyen
Mumbai: As the US economy goes through a stagflationary shock owing to higher tariffs, India and other countries will remain outliers, according to Claudio Irigoyen, managing director and head of global economics research at Bank of America Global Research. While Irigoyen expects the US Federal Reserve to refrain from cutting rates as it tackles lower growth and higher inflation, he says other central banks are likely to cut rates as they face lower growth and lower inflation. The market was earlier expecting five rate cuts from the US Fed this year, but has lowered its expectation to two. Also read: 'Why did you invite Modi for G7 Summit?': Canadian PM Carney replies, 'India should be…' 'We call it a slowdown but not a recession (for US). So those are the two biggest out-of-consensus calls we've had," said Irigoyen. 'The Fed will not cut, and the US economy will slow down but will not enter into a recession." Irigoyen's team has lowered the global growth estimate to 2.8% for 2025 from 3.1% earlier. BofA expect India's gross domestic product (GDP) to grow 6.3% and Europe's 0.9%. According to Irigoyen, Indian's central bank will pause after delivering a surprise 50-basis-point rate cut and a 100-basis-point reduction in the cash reserve ratio (CRR) last week. 'We have been calling for RBI to cut rates by 100bps for some time, and with that rate trajectory achieved, we believe RBI can now wait and see the transmission, especially since they have changed their policy stance to neutral," he said. 'Naturally, given RBI's pro-growth stance, the risk will be for RBI to ease rates further, but given their current growth projections, we believe RBI will be patient and wait to see if GDP growth deteriorates from here to gauge whether more easing is needed or not." While Irigoyen remains sanguine about India's growth story, he believes that it will need to build more infrastructure to attract supply chains. Also read: Russian intelligence document calls China 'the enemy', leak exposes Moscow's deep fear 'India could be a relatively good story because it's relatively neutral from a geopolitical standpoint, or trying to be, and could be a point of attraction of FDI and relocation of supply chains, but this is going to take some time," he said. 'India needs to do the shore-up in terms of building more infrastructure to attract supply chains." BofA also expects the dollar to continue weakening, albeit not sharply. 'We do not see any short-term risk for the dollar to lose its reserve currency status," Irigoyen said. Irigoyen, however, expects global portfolios to continue rebalancing away from US assets into Europe and emerging markets, unwinding the overweight exposure to US assets into more neutral portfolios. 'As the geopolitical landscape around the world is changing, some countries are less inclined from a geopolitical perspective to buy US treasuries," he said. 'Central banks are moving away from US treasuries to gold. So while there is less demand, there is higher supply of treasuries because of the deficit." Also read: Will America's unbalanced trade doom the dollar? Irigoyen also said that all eyes are currently on the tax bill that is expected to be passed by the US Congress on 4 July. The legislation is expected to cut taxes by $3.7 trillion, while also increasing deficits by $2.4 trillion over the next decade.
Time of India
6 days ago
- Business
- Time of India
Will the US dollar continue to weaken amid economic uncertainties and rising treasury yields? Claudio Irigoyen answers
The US dollar is expected to remain somewhat soft, but not necessarily experience a sharp disorderly decline, said Claudio Irigoyen , head of global economics research at BofA Global Research . In a conversation with Himadri Buch, New York-based Irigoyen shared his views on the US dollar outlook , treasury yields , the fiscal bill and why India continues to stand out in the emerging markets pack. Edited excerpts: The US treasury yields have been rising while the US dollar is struggling to stay steady. Is there a crisis of confidence? Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villa For Sale in Dubai Might Surprise You Villas in Dubai | Search ads Learn More Undo What we are witnessing is probably a recalibration of expectations in response to a confluence of fiscal and policy uncertainties. The uncertainty is certainly weighing on consumer and business sentiment, prompting a natural wait-and-watch approach among companies, particularly about investment decisions. However, this hesitation, when paired with the broader fiscal gap, is prompting markets to demand a higher risk premium on US assets. That is leading to a sharp rise in treasury yields. At the same time, global investors, who had been heavily overweight on US assets and underweight on European assets, have begun rebalancing their portfolios. This is contributing to the US dollar's relative weakness against the euro and other currencies. I expect the US dollar to remain somewhat soft, but not necessarily experience a sharp disorderly decline. However, this should not be misconstrued as a threat to the US dollar's reserve currency status. Do you see money moving out of the US on account of the dollar weakening? Which are the regions that could benefit? The global investor base had become significantly overweight on US assets, so some moderation was to be expected. Consumption in the US is slowing but not to a degree that signals recession. While the US outlook has softened, it remains more compelling than much of Europe, where structural challenges persist and growth remains tepid. Among emerging markets, there are bright spots. India stands out as a resilient story, benefiting from structural reforms, demographic momentum and robust domestic demand. A few others may attract flows on a relative basis, but we should be realistic — when global growth slows, as we now expect it to, very few markets are immune. In a world, where US and China, the twin engines of global demand, are slowing, capital may rotate selectively, but broad decoupling is unlikely. Live Events How are investors looking at India? Global investors continue to view India as one of the more compelling narratives in an otherwise challenging global environment. While growth expectations have moderated slightly, we still expect India's GDP to expand 6.3% in 2025. Inflation is also trending lower, creating space RBI to cut rates further. Compared to other emerging markets, India's story remains structurally solid. Your evaluation of the US tax bill? The fiscal bill is one of the key concerns for the US economy. While the bill may provide some immediate stimulus, it risks entrenching a structural fiscal imbalance at a particularly fragile juncture. Moreover, the risks are that higher rates on the back of a larger deficit abort any stimulative effect on the economy. Preliminary assessments suggest that the approved bill could validate a primary deficit of around 3.5% of GDP and a headline deficit of 6.9%, which will not be sustainable in the absence of robust revenue growth. The dynamics of fiscal policy are now more critical than ever
Economic Times
6 days ago
- Business
- Economic Times
Will the US dollar continue to weaken amid economic uncertainties and rising treasury yields? Claudio Irigoyen answers
At the same time, global investors, who had been heavily overweight on US assets and underweight on European assets, have begun rebalancing their portfolios. Synopsis BofA Global Research's Claudio Irigoyen suggests the US dollar will likely remain soft without a major collapse. Rising US treasury yields reflect recalibrated expectations due to fiscal and policy uncertainties, impacting consumer and business sentiment. Portfolio rebalancing by global investors, shifting away from US assets, further contributes to the dollar's struggle. The US dollar is expected to remain somewhat soft, but not necessarily experience a sharp disorderly decline, said Claudio Irigoyen, head of global economics research at BofA Global Research. In a conversation with Himadri Buch, New York-based Irigoyen shared his views on the US dollar outlook, treasury yields, the fiscal bill and why India continues to stand out in the emerging markets pack. Edited excerpts: ADVERTISEMENT The US treasury yields have been rising while the US dollar is struggling to stay steady. Is there a crisis of confidence?What we are witnessing is probably a recalibration of expectations in response to a confluence of fiscal and policy uncertainties. The uncertainty is certainly weighing on consumer and business sentiment, prompting a natural wait-and-watch approach among companies, particularly about investment decisions. However, this hesitation, when paired with the broader fiscal gap, is prompting markets to demand a higher risk premium on US assets. That is leading to a sharp rise in treasury yields. At the same time, global investors, who had been heavily overweight on US assets and underweight on European assets, have begun rebalancing their portfolios. This is contributing to the US dollar's relative weakness against the euro and other currencies. I expect the US dollar to remain somewhat soft, but not necessarily experience a sharp disorderly decline. However, this should not be misconstrued as a threat to the US dollar's reserve currency status. Do you see money moving out of the US on account of the dollar weakening? Which are the regions that could benefit? The global investor base had become significantly overweight on US assets, so some moderation was to be expected. Consumption in the US is slowing but not to a degree that signals recession. While the US outlook has softened, it remains more compelling than much of Europe, where structural challenges persist and growth remains tepid. Among emerging markets, there are bright spots. India stands out as a resilient story, benefiting from structural reforms, demographic momentum and robust domestic demand. A few others may attract flows on a relative basis, but we should be realistic — when global growth slows, as we now expect it to, very few markets are immune. In a world, where US and China, the twin engines of global demand, are slowing, capital may rotate selectively, but broad decoupling is unlikely. How are investors looking at India? Global investors continue to view India as one of the more compelling narratives in an otherwise challenging global environment. While growth expectations have moderated slightly, we still expect India's GDP to expand 6.3% in 2025. Inflation is also trending lower, creating space RBI to cut rates further. Compared to other emerging markets, India's story remains structurally solid. ADVERTISEMENT Your evaluation of the US tax bill? The fiscal bill is one of the key concerns for the US economy. While the bill may provide some immediate stimulus, it risks entrenching a structural fiscal imbalance at a particularly fragile juncture. Moreover, the risks are that higher rates on the back of a larger deficit abort any stimulative effect on the economy. Preliminary assessments suggest that the approved bill could validate a primary deficit of around 3.5% of GDP and a headline deficit of 6.9%, which will not be sustainable in the absence of robust revenue growth. The dynamics of fiscal policy are now more critical than ever (You can now subscribe to our ETMarkets WhatsApp channel) Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Cyient shares fall over 9% after Q4 profit declines, core business underperforms Cyient shares fall over 9% after Q4 profit declines, core business underperforms L&T Technology Services shares slide 7% after Q4 profit dips L&T Technology Services shares slide 7% after Q4 profit dips Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first? 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