Gita Gopinath: Next 24 hours critical to assess economic impact of war

“I think we’re in a very troubling place at the moment, and it’s really hard to tell which direction the war is going to take. We’re all in the wait and see mode… the next 24 hours are going to be critical to the direction of the war, and therefore the consequences for the global economy,” according to Gita Gopinath, former First Deputy Managing Director at the International Monetary Fund.

She highlighted that markets are currently reacting to the conflict as a stagflationary shock—where growth slows while inflation rises. Equity markets have weakened on growth concerns, while bond markets are also under pressure due to rising inflation expectations.

According to her, central banks are likely to remain cautious and delay rate cuts as they assess the evolving situation. However, she noted that markets may be overestimating the likelihood of aggressive rate hikes, as policymakers are expected to wait for more clarity before taking action.
For full interview, watch accompanying video

Oil remains the biggest variable. If crude stays elevated, the hit to global growth could be significant. Gopinath said if oil averages around $100 a barrel for the rest of the year, it could shave off nearly 0.5-0.6 percentage points from global growth and push inflation higher. That kind of disruption, she warned, is still not fully reflected in market pricing.

For India, the impact is already visible. The rupee has weakened sharply as higher oil prices raise the import bill and strain the balance of payments. Gopinath said this is a fundamental shock rather than a temporary reaction, suggesting that policymakers should allow the currency to adjust, stepping in only if moves become excessive