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In the big global story overnight, US consumer inflation came in much hotter than expected. In fact, it increased by the most in nearly a year and a half in January. That reinforces comments by Federal Reserve officials, including Chair Jerome Powell, that the central bank is in no rush to cut interest rates.
The higher-than-expected inflation reading was likely on account of businesses raising prices at the start of the year. The fear is that the current administration, led by President Donald Trump, is pushing for tariff increases to spur domestic production. But this ultimately pushes prices higher for Americans and leads to higher inflation.
Meanwhile, Trump said he would impose reciprocal tariffs, as soon as Wednesday evening, on every country that charges duties on US imports.
Equities fell on Wall Street and bond yields spiked after the reading, as expectations of rate cuts in the remainder of the year were reset. The Dow Jones Industrial Average fell about 0.5% and the S&P 500 ended lower by 0.3%. The Nasdaq Composite ended flat. In the Asia Pacific region, the three early risers have started positive.
In other international news, Trump discussed the war in Ukraine in phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy. The expectation of Trump’s involvement as a peacemaker resulted in a cooling of crude prices, with brent falling to below $75 to the barrel.
In the top news back home, India’s retail inflation moderated to a five-month low in January, led by lower vegetable prices. The CPI based inflation moderated to 4.31% in January from 5.22% in December. This was below consensus estimates, which had pegged it at 4.4%.
Food and beverage inflation eased to 5.68% in January from 7.7% in December. This was led by vegetable prices further cooling to 11.35% compared to 25.6% in the same duration. India’s core inflation, which excludes volatile food and fuel components, rose by 3.74% in January, as per Bloomberg, compared to 3.64% in December.
Meanwhile, India’s Index of Industrial Production growth cooled to 3.2% in December, after rising to a six-month high of 5% in November. The industrial production growth has decreased primarily due to the slowing of manufacturing output. After rising by 5.8% in November, the sectoral output increased by 3% in December.
Later today, the new Income Tax Bill is expected to be tabled in the Parliament, with sources indicating that it may come into force by April 2026. This much-anticipated legislation seeks to replace the existing Income Tax Act of 1961 and, once passed, will be called the Income-Tax Act of 2025. A memorandum may also be issued alongside the bill, upon its introduction.
In the banking space, the Reserve Bank of India lifted its ban on Kotak Mahindra Bank Ltd., allowing it to issue new credit cards and onboard new customers through online and mobile banking channels. The central bank had asked the private lender to cease and desist the services in April last year. It had concerns in the bank’s IT examination for 2022 and 2023 and continued failure on part of the bank to address them in a comprehensive and timely manner.
In more corporate news, British insurer Prudential Plc announced on Wednesday that it is evaluating the potential listing of ICICI Prudential Asset Management Co., which could involve a partial divestment of its shares through the initial public offering route, subject to market conditions, necessary approvals, and other factors.
ICICI Bank, while sharing the announcement made by its joint venture partner Prudential with the exchanges, said, it intends to retain its majority shareholding in the company.
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