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Taking in to account the impact of the second wave of infections, what GDP growth rate (%) do you expect in FY2022?

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Reserve Bank of India

In the June policy meeting, the Monetary Policy Committee (MPC) kept the policy rate unchanged and voted unanimously to maintain an accommodative stance, as long as necessary, to revive and sustain the growth on a durable basis. The MPC noted the downside risks to growth due to the rapid spread of the virus; policy statement had a dovish underpinning.

The RBI announced plans to implement GSAP 2.0 in Q2 FY2022 of INR 1.2 trillion, slightly higher than GSAP 1.0 of INR 1 trillion ( which will now include State Development Loans (SDL) purchases also ). RBI has committed to providing ample liquidity, and is looking to ‘turning systemic liquidity into equitable distribution’ across sectors.

We expect the RBI to keep its policy rates unchanged and stick to its accommodative framework for most of FY2022. RBI could take more measures for liquidity support to specific stressed sectors and to incentivize banks to increase credit offtake. In our best-case scenario, we see RBI moving towards normalising the policy going into Q4 FY2022, if there are indications that the pandemic has receded.

Federal Reserve

In the last policy meeting in April, the FOMC maintained status quo on its accommodative framework and made a further upgrade to its assessment on the economy. Policy rates were kept at the zero lower bound as was the monthly QE purchases of USD 120 bn. Despite the upgrade, the Fed Chair reiterated that the central bank will keep interest rates at the zero lower bound till end-2023.

In the June policy meeting, we expect the FOMC to maintain status quo. However, the guidance on the state of the economy is likely to remain fairly constructive. However, we expect a dovish guidance with the Fed Chair playing down the possibility of any tightening in the policy. We do not expect any upgrades in terms of economic projections and expect the dot plot to continue to show that policy rates will be kept at the zero lower bound until end-2023.

Going in to Q42021, we expect the Fed to prepare the markets for tapering of its purchases that could commence from Q12022 onwards.

Bank Of England

In its last policy meeting in May, the BoE maintained status quo but surprised the market by announcing a small tapering in its weekly purchases programme, from GBP 4.4 billion prior to this policy meeting to GBP 3.4 billion over June-August.

In its upcoming policy meeting in June, we expect the BoE to maintain status quo and continue with its revised QE programme to provide as much support as possible to the real economy.

We think that BoE will move towards ending its QE purchases programme by end-2021. However, we expect it to keep the size of its balance sheet unchanged and not tighten the policy anytime over 2021-22.

European Central Bank

In the last policy meeting in April, the External Commercial Borrowing (ECB) kept its accommodative framework unchanged, providing a dovish guidance as concerns about the growth outlook remained in place. The ECB President also ruled out the possibility of 'tapering in purchases' anytime soon.

In the June policy meeting, we expect the ECB to maintain its status quo and ensure that the size of its weekly purchases under the Pandemic Emergency Purchases Programme remains firmly in place.

With the Euro-zone recovery likely to lag that of US and UK, we expect the ECB to continue using the entire envelope of EUR 1850 under the Pandemic Emergency Purchases programme, with a bias to increase the size, if required, going in to 2022.

People's Bank of China

With the Chinese economy rebounding sharply from COVID-19, The People's Bank of China (PBOC) has moved from an accommodative liquidity regime to a neutral liquidity regime in 2021. Concerns about inflation and asset bubbles appear to have increased. However, policy rates/money market rates have been kept unchanged.

We expect the PBOC to maintain a neutral liquidity regime in Q2 2021 to Q3 2021 and keep its policy rates unchanged.

We expect the PBOC to move to a tightening regime going in to Q4 2021 and H1 2022 responding to a pick-up in the inflation and improvement in its growth. The policy rates might be kept unchanged but the Central Bank could drain the liquidity and raise short-term money market rates.

Over the years we have found ICICI bank Research to be quite insightful and actionable. The statistical and quant based observations in particular are unique and lend interesting perspectives. Forward looking research helps in forming a cross asset view.

TCS Treasury

Tata Consultancy Services

The research reports are very well structured, ideas clear and writing concise and argumentative. The literature review is comprehensive and you manage to successfully discuss the importance of your research, from a theoretical and an applied perspective.

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Treasury @ HCL Technologies
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