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NEWS FEED

The Federal Open Market Committee (FOMC) kept rates steady at 5.25%-5.50%, while providing a hawkish guidance. It warned that sticky inflation could warrant at least one more rate hike this year. GDP growth projections were raised from 1% to 2% for 2023 and from 1.1% to 1.5% for 2024. Inflation projections were largely left unchanged.

12 Hours ago

ICICI Bank expects the FOMC to: (a) maintain status quo while providing a hawkish guidance, (b) ‘dot-plot’ to show that the median of FOMC members keep the terminal rate unchanged at 5.5%-5.75% while increasing the terminal rate to 4.75%-5.00%, (c) raise growth projections for 2023 from 1% to 2%, (d) lower unemployment rate projections and (e) keep inflation projections above the 2% threshold for 2023-2025..

1 Days ago

The Centre’s advance direct tax receipts for Q2FY24 from companies, LLPs and individuals rose by a robust 24% YoY to Rs. 2.4tn. This was aided by a sharp increase in income tax receipts and a rebound in corporate tax collections.

3 Days ago

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i360 Indices

UFI-05.06.22

ICICI Bank’s weekly UFI1 had a marginal moderation to 111.4 vs. 111.8 the week before. Download the report to know more.

View chart

05 Jun 22 09:00 AM

UFI-29.05.22

During the week the labour market remained steady with unemployment rate index was marginally down vs. the week before.Download the report to know more.

View chart

29 May 22 12:00 PM

UFI-22.05.22

During the week, unemployment rate in both urban and rural areas increased thus, weighing on the overall index.Download the report to know more.

View chart

22 May 22 12:00 PM

UFI-15.05.22

During the week unemployment rate witnessed considerable fall driven by reduction in rural unemployment while urban unemployment rate too registered a small fall. Labour force participation rate saw a marginal dip.Download the report to know more.

View chart

15 May 22 12:00 PM

UFI-08.05.22

Unemployment rate increased to 8.17% during the week vs. 7.39% seen in the previous week, led by a sharp rise in rural unemployment (8.04% vs 6.4% last week) while urban unemployment rate displayed a moderation (8.45% vs 9.46% last week).Download the report to know more.

View chart

08 May 22 12:00 PM

CENTRAL BANK ZONE

Reserve Bank of India

In the August policy meet, the MPC kept the repo rate unchanged at 6.50% and retained the stance at withdrawal of accommodation. The vote to keep the repo rate unchanged was unanimous, while the vote to retain the stance was 5:1. As on date, the cumulative rate hikes stood at 250bps since May 2022 policy.

Inflation estimate for FY24 was upped by 30bps to 5.4%. As per the new trajectory, the MPC expects inflation at 6.2% in Q2, 5.7% in Q3, 5.2% in Q4FY24 and 5.2% in Q1FY25. It retained growth estimate for FY24 at 6.5%.

We expect Q2FY24 inflation at 6.8%, 60bps higher than MPC's forecast. Given the committee's inflation forecast for Q1FY25, real rate is estimated to be around 1.3%. Growth is likely to be stronger in H1FY24 compared to H2. We believe the MPC will look through the recent spike in food inflation as it is transient. Hence, our base case is a long pause on rates. However, we cannot rule out a hike in the October policy is the MPC assesses inflation pressures to have generalized. We expect rate cuts to begin in Q2FY25.

Federal Reserve

In its policy meeting in July, the FOMC raised their policy rate by 25bps to 5.25%-5.50% while retaining its QT framework. However, it provided a data dependent guidance in terms of its future rate hikes are considered while committing to its need to maintain a restrictive framework.

In the next policy meeting in September, we think that the decision to raise rates by 25bps will be a close call that will remain contingent on US labour market developments.

We would not rule out a further 25bps rate hike either in September or November so as to ensure that disinflationary forces remain firmly in place resulting in a terminal rate of 5.5%-5.75% that will be followed by a prolonged pause. The QT program is likely to remain in place.

Bank of England

In its last policy meeting in June, the BoE raised rates by 25bps to the 4.5% mark while indicating that further tightening could be in store reflecting an improved economic outlook and elevated inflation rates.

In its upcoming policy meeting in June, we expect the BoE to raise rates by 25bps while keeping up expectations for further tightening.

We would not rule out a further 25bps increase in the policy rate over 2023 resulting in a possible terminal rate of 5%.

European Central Bank

In its last policy meeting in July, the ECB raised the policy rates by 25bps to the 3.75% mark while pivoting a data-dependent guidance. It provided dovish messages by stating that there was strong indications that disinflationary pressures were taking hold.

In its September policy meeting, we would not rule out a 25bps hike, although the final outcome will be a close call.

We expect a terminal rate of 4.00% that will be followed by a prolonged pause.

People's Bank of China

Over 2023, the PBOC has eased policy rates by 10bps while providing a dovish guidance. Liquidity infusion via OMOs have remained in place.

Given that the economy appears to be on a much weaker footing than we previously assumed, we would not rule out a further 15bps-25bps cut in policy rates accompanied by reductions in the RRR.

MARKET EVENTS CALENDAR

Events

17th Nov

Events

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TREASURER'S CORNER

Prasanna Balachander

Group Head – Global Markets – Sales, Trading and Research

Real Estate and Urbanisation to Boost Economy

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India de-coupling: A myth or reality?

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08 Jun 23 03:05 PM Media Bytes

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IN-HOUSE VIEWS

Last updated: 28 July 2023

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