The world of finance is witnessing a flurry of activity. Even as Donald Trump’s dramatic election victory sends ripples of uncertainty across the globe, major central banks are proceeding with widely anticipated interest rate cuts. The US Federal Reserve (Fed), the European Central Bank, and the Bank of England have all trimmed rates by 25 basis points. These decisions, according to Fed Chairman Jerome Powell, are purely data-driven, pointing to easing inflation and steady economic growth. This synchronised move across developed economies signals a collective confidence in having inflation under control, at least for now.

Trump’s Shadow Looms

However, the celebratory mood might be premature. Trump’s return to power injects a dose of unpredictability. His previous term was marked by protectionist trade policies and significant tax cuts, actions that could reignite inflationary pressures. If his campaign promises translate into policy, we could see new trade barriers, increased government spending, and stricter immigration policies, all of which could upset the delicate balance central banks are trying to achieve. European policymakers are understandably concerned, as a trade war with the US would severely impact their already fragile economies, grappling with high energy costs and slow growth.

RBI’s Cautious Path

What does this mean for the Reserve Bank of India (RBI)? Unlike its global peers, the RBI held steady on rates in its October meeting. Governor Shaktikanta Das has indicated that a rate cut is contingent on inflation sustainably nearing the 4 percent target. For the RBI, domestic factors weigh heavily. Sticky food inflation and the uncertain impact of an extended monsoon on agriculture prices are key concerns. While India might benefit from the ‘China-plus-one’ strategy under a Trump administration due to tariff differences, this is just one piece of a complex puzzle. The trajectory of global oil prices, heavily influenced by US oil policy under Trump, remains a critical factor for India’s inflation outlook. Given its traditionally cautious stance, it’s improbable that the RBI will rush into rate cuts simply to align with other central banks.

Women Power Blooms

In a contrasting positive development, Goldman Sachs’ 10,000 Women Finance for Growth initiative is set to channel INR 850 crore to 200 women entrepreneurs in India. This significant funding boost aims to empower women-led businesses, fostering job creation and economic activity. The initiative provides not only financial assistance but also crucial mentorship and networking opportunities. With government backing and proven success in empowering women entrepreneurs, this programme underscores the immense untapped potential of women in driving India’s economic growth.

Will the RBI follow the global rate cut trend in its December meet? It seems unlikely. The central bank is expected to maintain its cautious approach, prioritising domestic inflation concerns over global pressures. Keep a close watch on the RBI’s announcements in December for a clearer picture of its monetary policy direction.

Image Courtesy: X (Federal Reserve)