Allspring’s Paroda sees room for Fed rate cuts in second half; prefers India, Korea in EM basket

Prashant Paroda, Portfolio Manager for Emerging Markets at Allspring Global Investments, said the US Federal Reserve may begin cutting rates in the second half of 2025 if inflation remains under control.“If Fed Chair doesn’t see a huge spike in inflation, we may see rate cuts,” he said. The market is already expecting at least two rate cuts, although “Chairman Powell might be more restrained,” Paroda added, noting that decisions will remain data dependent.
He pointed out that Fed Chair Jerome Powell had recently indicated that he might have cut rates already if not for the impact of tariffs. He suggested that the US administration’s trade actions are influencing monetary policy decisions.
Also Read | CLSA strategist says India still pricey, foreign investors turning cautiousWithin emerging markets, India and Korea remain top picks for Allspring. “India as well is one of our top three markets when you look from an allocation standpoint,” Paroda said. He noted that Korea is also benefiting from a new government focused on corporate governance reforms and possible fiscal support.

In China, Paroda said growth will depend on how the real estate sector evolves and whether the government steps in with stronger support measures.

Paroda also said that both the US and Indian equity markets are expected to continue performing well, supported by easing inflation and potential trade agreements.Also Read | HSBC’s Williem Sels sees no US recession risk, stays positive on India, China, Singapore

While some sectors, such as healthcare and IT, have lagged, he expects better clarity to emerge through the earnings cycle. Even if some companies underperform this quarter, “the key will be the commentary they will give going into next quarter,” Paroda said.

On the broader global outlook, he said the US still attracts a majority of global capital flows—around 60–70%—but added that apart from the AI-led capital expenditure cycle, other segments such as banks may show subdued earnings in the second half. In contrast, Europe and several emerging markets are showing strength.

Also Read | HSBC MF CIO sees discretionary demand and credit growth rebounding by year-end

On the dollar, he said any changes would largely depend on how a new Fed chair balances the dual mandate of inflation and employment. “Once you take that chair… you focus on that pretty seriously and try to make data-dependent decisions,” he said.

For the full interview, watch the accompanying video

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