Global Markets Face Jitters as Inflation Surprises Fuel Policy Worries

Global financial markets witnessed a fresh wave of volatility this week as higher-than-expected inflation prints from the United States reignited concerns around the Federal Reserve’s rate trajectory. The U.S. Consumer Price Index (CPI) for June rose 0.4%, exceeding consensus forecasts and pushing Treasury yields higher across the curve. With Producer Price Index (PPI) data also indicating upstream cost pressures, investor expectations for near-term rate cuts have shifted further out, unsettling both equity and debt markets globally.

The ripple effects were swiftly felt across Asia and Europe, where benchmark indices posted moderate declines amid risk-off sentiment. Indian markets, already grappling with elevated valuations and global fund outflows, remained largely range-bound, cushioned only by optimism in domestic earnings. Currency markets were not immune either—the Indian rupee weakened to a record low against the U.S. dollar, triggering speculation over potential RBI intervention. As central banks globally walk the tightrope between growth and inflation, investors are recalibrating their portfolios to hedge against extended policy tightening, reduced liquidity, and lingering geopolitical risks.