Irigoyen said, “We don’t have any hikes for the Fed for this year, and the way we think about it, and the way the Fed is thinking about it, is the war represents a stagflationary shock for the world economy, and for the US in particular.”
Irigoyen said any decision by the Federal Reserve to raise interest rates would depend largely on whether inflation pressures prove persistent and whether inflation expectations remain well anchored.
At present, he believes there is not enough evidence to suggest inflation will stay elevated long enough to warrant rate hikes. He also noted that the stagflationary impact on growth has not been significant enough so far.
As a result, the Fed is likely to stay in wait-and-watch mode, gathering more data while maintaining a hawkish tone rather than moving immediately toward rate increases.
For India, Irigoyen said concerns around the current account deficit may be overstated. He explained that the widening deficit is largely driven by higher investment and imports of machinery rather than unsustainable consumption.
“The worsening of current account deficits that you can have – the India one is not as problematic as it might seem,” he said, noting that higher investment today could support stronger economic growth in the future.
He also believes foreign capital flows into India could improve if geopolitical tensions ease and oil prices moderate. While there are questions around how AI could affect India’s growth model, Irigoyen said it is too early to draw negative conclusions.
According to him, AI has the potential to improve productivity globally over the next several years, with emerging markets expected to benefit as adoption increases. While countries such as Taiwan and South Korea are already seeing gains, he said more economies could benefit over time.
BofA currently expects crude oil prices to average around $92–93 per barrel. However, Irigoyen warned that prices could move higher if geopolitical tensions worsen or if disruptions impact global oil supply routes.
He said markets are still pricing in a relatively quick resolution to ongoing conflicts, though uncertainty remains elevated.
For the entire discussion, watch the accompanying video
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