Emerging markets expert and founder of Mobius Capital Partners, Mark Mobius, has reportedly warned that if inflation continues to persist, interest rates may have to be raised to 9%.
“If inflation is 8%, the playbook says you’ve got to raise rates higher than inflation, which means 9%,” Mobius told Bloomberg TV on Monday. The emerging market expert also believes inflation may not recede any time soon, according to the report.
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Mobius’ comments come at a time investors and traders are preparing for another 75 basis points rate hike by the U.S. Federal Reserve during its November monetary policy meet.
Traders dealing with Fed funds futures are factoring in a peak rate of near 5% in March, the report said. Market-derived expectations on the one-year inflation outlook have fallen from as high as 6% in March to 3.2%, the report added.
Following a volatile week, major Wall Street indices gained on Monday, led by upbeat earnings. The SPDR S&P 500 ETF Trust SPY closed over 2.5% higher, while the Invesco NASDAQ 100 ETF QQQM closed over 3% higher.
On Commodities: The emerging market expert also warned investors to be cautious with commodities as demand from some major buyers may cool, the report said.
“People buying commodities are sitting on weaker and weaker currencies,” he said. “You’re probably going to see a downturn in commodity prices,” Mobius added.
The investor said he has allocated funds to India, Taiwan and Brazil, adding that he has deployed “a little bit in Turkey, and also Vietnam,” according to the report.
Photo courtesy: Mobius Capital Partners
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