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NEWS FEED

India’s Q2FY24 GDP surprised positively at 7.6% YoY, led by investment even as consumption is relatively muted at 3.1% YoY (weak rural demand). GVA growth too was much higher at 7.4% YoY (7.8% YoY in Q1) led by industry at 13.2% YoY even as agriculture at 1.2% YoY and services at 5.8% YoY showed a dip. Nominal GDP growth in Q2 is only marginally higher than real GDP growth at 9.1% as against 8.0% in Q1.

1 Days ago

The Union cabinet on Wednesday approved the Terms of Reference for the 16th Finance Commission to recommend the tax distribution between the Union and the States of the net proceeds of taxes, on the measures needed to augment the resources of local bodies and to review the present arrangements on financing Disaster Management initiatives.

2 Days ago

The Union government has asked states to continue to lift food grains under the Pradhan Mantri Garib Kalyan Anna Yojana free of cost, confirming the scheme will not on 31 December 2023.

4 Days ago

Federal Reserve Governor Michelle Bowman said she expects to support additional tightening of monetary policy to return inflation to the central bank’s goal. On the other hand, Federal Reserve Bank of New York President John Williams said Tuesday longer-term inflation expectations have been encouragingly steady, and he welcomed declining inflation pressures.

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 October policy meeting, the MPC kept the repo rate unchanged at 6.5% and retained the stance at ‘withdrawal of accommodation’. Vote on the former was unanimous while on the later was 5:1

It kept the inflation forecast for FY24 unchanged at 5.4%. However, it upped Q2FY24 forecast to 6.5% from 6.2% previously and lowered Q3FY24 forecast by 10bps to 5.6%. The Governor reiterated that the inflation target was 4% and noted that core inflation needs to decelerate further to bring headline inflation to the 4% target. Growth estimates were kept unchanged at 6.5% for FY24

With continuing durable liquidity surplus, RBI would be looking at OMO sales to impound durable liquidity. Our estimates suggest INR 500bn of OMO sales in H2 to absorb excess liquidity after accounting for demand for currency and CRR build-up. The bar for change in stance is inflation at 4% on durable basis. As per RBI’s current trajectory that should happen Q2FY25 onwards. Thus change in stance is a possibility in August or October with rate reductions later in the year (December or February)

Federal Reserve

In its policy meeting in November, the FOMC kept the policy rates steady at 5.25%-5.50% along with no change in its QT framework. However, the Fed Chair indicated that the policy rate is close to its peak rate and that future decisions would be data-dependent. Focus of monetary policy had shifted to financial conditions to ensure the ongoing transmission of the restrictive regime to the real economy.

Our base-case of status quo remains for the December policy meeting based on the assumption that disinflation process remains in place and that further re-balancing of the labour market takes hold.

Our base-case of a prolonged pause up to June 2024 remains in place. However, if financial conditions ease relative to the monetary stance or if the economy shows continued signs of being resilient, we would not rule out one more 25bps hike in either December 2023 or January 2024.

Bank of England

In its policy meeting in November, the BoE’s MPC maintained status quo in a split 6-3 vote with the dissenters preferring a rate hike. The central bank retained its tightening bias by stating that ‘rates should be sufficiently restrictive for sufficiently long’ and that ‘policy would likely need to be restrictive for an extended period of time’.

We expect the BoE to maintain status quo in December while keeping its tightening framework in place.

We believe that the BoE has transitioned to a prolonged pause and that it will keep rates on hold at least until April 2024 if not longer.

European Central Bank

In its last policy meeting in October, the ECB maintained status quo keeping its deposit rate unchanged at 4% while providing a data-dependent guidance. It also provided strong indications that it would keep rates at current levels for a considerable period of time.

In its December policy meeting, we expect the ECB to maintain status quo while re-affirming that rates will remain elevated at current levels.

We expect the ECB to keep rates unchanged at least until Q12024 with future decisions likely to remain contingent on the manner in which the economy evolves.

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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View ALL Reports

TREASURER'S CORNER

Prasanna Balachander

Group Head – Global Markets – Sales, Trading and Research

Growth, Monetary Policies & Markets

30 Oct 23 03:05 PM Media Bytes

India’s inflation and US Monetary policy outlook

13 Oct 23 03:05 PM Media Bytes

U.S. Economy to Remain Resilient

21 Sep 23 03:05 PM Media Bytes

Real Estate and Urbanisation to Boost Economy

15 Sep 23 03:05 PM Media Bytes

India de-coupling: A myth or reality?

15 Jun 23 03:05 PM Exclusive Videos

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IN-HOUSE VIEWS

Last updated: 2 December 2023

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