India may have less sticky inflation than the US and we may see inflation start tapering out after a quarter or so in India, said Mihir Vora, Director & CIO, Max Life Insurance in an interview with ET Now.
Vora highlighted inflation situation in the US is different from that of India.
"The US is very much linked to the huge stimulus and the demand side of the equation as far as inflation is concerned and that has created a demand for services, driving house prices higher, driving house rentals higher and that is much stickier," Vora told ET Now.
"For India, the inflation has been more supply side driven because we never really stimulated the economy and so there is no artificial demand to be collapsed in India. It is more on the supply side, especially the oil and food prices. India actually might have less sticky inflation than the US and for India, we may see inflation start tapering out after a quarter or so," Vora added.
As the inflation in the US has hit a fresh four-decade high, the Fed may be forced to lift rates more aggressively which will cause a sharp and fast recession in the US which may force the US Fed to start loosening rates again.
"The logic now seems to be because the Fed will tighten very hard in the next meeting, it will create a very fast and sharp recession in the US. And because the recession will be so fast and sharp by the first half of next year, the Fed will be forced to start loosening rates again. The market is working with that kind of warped logic," said Vora.
Vora believes the global, as well as the Indian market, may not have fully digested the implications of a Fed tightening and remaining tight for a long period of time. "I would be a bit cautious here," he said.
Disclaimer: This article is based on an ET Now interview. The views and recommendations made above are those of the analyst and not of MintGenie.