Inflation-wary Fed may put IT revival on hold
Indian outsourcing leaders will likely have to wait longer, perhaps until the start of FY26, for a revival in business as the US Federal Reserve could keep interest rates elevated in the world’s largest economy to ensure a lasting victory over politically uncomfortable inflation. High real rates could elevate hurdle rates for companies, potentially crimping growth in discretionary technology spends.
“The Fed's hawkish approach is a double-edged sword. Higher interest rates could lead US clients to curtail discretionary IT spending, impacting revenue growth for Indian firms,” said Hansa Iyengar, senior lead analyst for UK-based IT research firm Omdia.
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Offering CollegeCourseWebsiteIndian School of BusinessISB Product ManagementVisitIndian School of BusinessProfessional Certificate in Product ManagementVisitMITMIT Technology Leadership and InnovationVisitEven as FY24 earnings showed subdued revenue growth across Indian IT majors, strong deal wins and expectations of technology services demand coming back had renewed business revival hopes in the second half of fiscal 2025 that ends in March next year. Most IT majors however have continued to be cautiously optimistic given the prolonged uncertainty in the industry.
Last week, the US Federal Reserve said the rates will remain ‘high for long’ amid elevated inflation (3.5% in March against target of 2%) dashing the optimism that could have been supported by a rate cut. An interest rate reduction pushes clients to
