Tag: inflation

European Central Bank keeps interest rate unchanged at 4.5%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Central Bank (ECB) on Thursday, April 11, kept its benchmark interest rates unchanged for the fifth straight meeting, as was widely expected. With the ECB decision, the interest rate remains unchanged at 4.5%, indicating a continuation of the current monetary policy stance. Likewise, the ECB has left the deposit facility rate steady at 4% and the marginal lending rate at 4.75%.

#Breaking | European Central Bank (@ecb ) Keeps Interest Rate Unchanged At 4.5%

Here’s more 👇 pic.twitter.com/RqI21Eb7ML

— CNBC-TV18 (@CNBCTV18Live) April 11, 2024

However, the ECB signalled a potential future cut in the near future, particularly in its June meeting.

“…the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction,” it said in a statement.

That said, however, the decision may not be that easy amid persisting inflationary pressures in the US. The March figures, the third straight month of inflation readings well above the Federal Reserve’s 2% target, threaten to torpedo the prospect of multiple interest rate cuts this year. Fed officials have recently made clear that with the economy healthy, they’re in no rush to cut their benchmark rate despite their earlier projections that they would reduce rates three times this year.

The ECB and the developed world’s other central banks are tilting toward reducing interest rates that were imposed to tame inflation. The Swiss National Bank was the first major central bank to cut rates in the current cycle on March 21. The big exception is Japan, which raised rates for the first time in 17 years on March 19.

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Bankers and economists weigh in on RBI’s April monetary policy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Leading bankers and economists shared their take on the Reserve Bank of India’s (RBI’s) first monetary policy of the year, focusing on the central bank’s growth and inflation predictions, rate cut schedules, and how the US Federal Reserve’s actions might affect India’s interest rates.

The RBI’s Monetary Policy Committee left key rates unchanged for the seventh straight time while retaining the ‘withdrawal of accommodation’ stance.

In his address, Governor Shaktikanta Das said that while inflation is moving closer to target, the last mile of inflation is turning out to be challenging.

As a result, the central bank has left the Consumer Price Inflation (CPI) forecast unchanged at 4.5%.

According to Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank there are a fair amount of risks on the food inflation side and that is the reason there seems very limited room for RBI to act in the near term.

“So, they will be looking very cautiously at most of the inflation-linked data, and of course, the global cues and that is when they can consider a change but that doesn’t happen in the first half of the year (H1) at all,” Bhardwaj said.

For Kaushik Das, Chief Economist at Deutsche Bank, the tweaks in the central bank’s inflation forecasts came as a surprise.

The central bank has revised the inflation forecast downward to 4.9% from 5% despite the predictions of heatwaves across the country between April and June.

Similarly, for July-September, the forecast has been revised to 3.8% from 4%, and for January-March 2025, it is now at 4.5% versus 4.7%.

“If you are hawkish on inflation, then they should not have touched the inflation forecast as whatever was there was okay, and there was no need for tweaking at this point of time,” he added.

Also Read | RBI Monetary Policy 2024: Interest rates unchanged for the seventh time in a row

According to CS Setty, Managing Director of SBI said, while the policy was broadly on the expected lines, Governor Shaktikanta Das’ commentary on liquidity was reassuring.

“We could witness in the last few weeks that the liquidity is not constrained in the system and whenever liquidity is excess, the absorption was done and when the shortfall is noticed, the injection was done. So, to that extent, what the Governor has assured us in terms of being nimble and flexible is reassuring,” Setty said.

Also Read | MPC meeting: Real Estate stocks cheer RBI’s decision to keep repo rate unchanged

Shobhit Mehrothra, Head-Fixed Income at HDFC AMC sees the potential for a first rate cut by the RBI in August, well after the US Fed starts easing rates.

“If the Fed is going to perhaps start the easing cycle with the first-rate cut in June, I would guess that perhaps RBI could consider an August cut if inflation moves inline as per expectations in the next few prints.”

Also Read | RBI MPC leaves inflation projection for FY25 unchanged at 4.5%, assuming a normal monsoon

Sandeep Yadav, Head of Fixed Income, DSP Mutual Fund agrees with Mehrothra.

The RBI’s decision on when to cut interest rates for the first time will mostly depend on when the US Federal Reserve cuts rates for the first time.

It’s all about the data, whether it’s from India or the US, says Mehrothra.

Also Watch: Neeraj Gambhir, Group Executive & Head-Treasury at Axis Bank; Pranjul Bhandari, Chief India Economist at HSBC, Ashhish Vaidya, MD & Head of Treasury & Markets at DBS Bank India and Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India, in an interview with CNBC-TV18, assessed and analyse the RBI Monetary Policy.

For the entire discussion, watch the accompanying video

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RBI holds repo rate at 6.5% for 7th consecutive time; home, auto EMIs to remain unchanged: TOP HIGHLIGHTS

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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RBI Monetary Policy 2024 HIGHLIGHTS: The Reserve Bank of India (RBI) Monetary Policy Committee that met for its bi-annual meeting from April 3 to April 5 has decided to maintain key lending rates, withdrawal of accommodation stance and FY25 GDP growth projection, Governor Shaktikanta Das also cautioned banks, NBFCs and other financial entities to give highest priority to governance and adherence to regulatory guidelines. Track RBI Monetary Policy 2024 LIVE updates here

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RBI Monetary Policy: 5 factors that could drive the central bank’s rate decision in April

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A confluence of factors, ranging from inflation and economic growth trajectories to global macro environment, are poised to influence the repo rate decision of the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) at its first meeting for the financial year 2025, set from April 3 to 5.

Here’s how experts believe these factors will play into the RBI’s policy decision:

Sustained economic growth

India’s economy is on an upswing, with growth forecasts for the last financial year (FY24) suggesting a robust performance ahead.

Sonal Varma, Managing Director and Chief Economist – India and Asia Ex-Japan at Nomura, told CNBC-TV18 that the economy is expected to exceed initial projections, possibly reaching an 8% growth rate.

Also Read | Experts anticipate RBI to keep interest rates unchanged in April

This optimistic outlook could prompt the RBI to adopt a cautious stance on rate adjustments to avoid overheating the economy.

India’s economy grew a stellar 8.4% in the fourth quarter of 2023, the fastest among major economies

Global macroeconomic conditions

The RBI’s policy decision is also likely to be influenced by global economic trends, particularly the stability of the US economy.

Jahangir Aziz, Global Head-EM Economics at JPMorgan, suggested that the RBI might hold off on any significant rate cuts until at least July, considering the global economic landscape.

The US Federal Reserve is currently expected to deliver its first cut in June, a Reuters poll in March showed. However, the risks are growing for the cut to happen later in the year.

While the Fed has indicated some rate cuts in the coming months, the RBI is expected to keep rates higher for longer.

JPMorgan predicts the first rate cut by RBI in July, and even that is unlikely to be a significant one, according to Aziz.

At its policy announcement on February 8, the MPC left the key repo rate—the rate at which RBI lends to commercial banks—unchanged at 6.5% for the sixth straight time.

Inflation forecasts

Inflation control is a perennial goal for the RBI, and current projections indicate a manageable scenario.

Inflation, at 5.09% in February, is expected to decline to 4.00% in the third quarter before rising, a separate Reuters poll showed. Price rises are expected to average 4.60% in the current fiscal year.

With inflation likely to stay within the 2%–6% target, the central bank may find some leeway in maintaining or subtly adjusting interest rates to support economic growth while keeping prices in check.

Monsoon predictions

The agricultural sector’s outlook, which is heavily dependent on monsoon patterns, also bears significance for the RBI’s policy framework.

A forecasted normal monsoon season, as predicted by Skymet, suggests that agricultural production could remain stable, thereby controlling food inflation and supporting rural income.

“There is a better chance of a normal and above normal…there is a very low chance of a below normal or drought this year,” Jatin Singh, the Founder and CEO of Skymetweather.com told CNBC-TV18.

Also Read | Skymet forecasts normal monsoon in 2024 with minimal El Nino impact

A normal monsoon is crucial for the RBI, as it directly impacts inflation and growth rates.

Crude oil prices

Lastly, the volatile nature of crude oil prices, exacerbated by geopolitical tensions, presents an external challenge for India’s economy.

With crude oil prices expected to remain elevated, the RBI will need to account for the impact of higher energy costs on inflation and the current account deficit.

Vivek Dhar, an analyst at Commonwealth Bank of Australia said, “Brent oil futures should track closer to $75 to $80 a barrel in coming months given our view that China’s oil demand growth will disappoint.”

Also Read | Oil rises with lower US stockpiles and OPEC meeting to the fore

This external factor could influence the RBI’s stance to mitigate any inflationary pressures arising from costly imports.

For the entire interview, watch the accompanying video

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Peter Cardillo of Spartan Cap explains why the US Fed might lower interest rates twice this year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Contrary to market expectations of three rate reductions totalling 75 basis points, Peter Cardillo, Chief Market Economist at Spartan Capital Securities, predicts the Fed opting for two cuts, with an initial cut of 50 basis points, followed by another 25 basis point reduction this year.

“This would be a scenario if inflation remains elevated and the US Fed decides not to cut in June, then that means that in September, they could cut by 50 basis points, and then 25 just before year-end, and that would make up the 75-basis point that the market is talking about,” Cardillo told CNBC-TV18.

On March 20, the US central bank decided to keep interest rates unchanged at 5.25-5.50%.

Despite this, it still anticipates three rate cuts in 2024.

The Fed has also revised its forecast for the 2024 gross domestic product (GDP) to 2.1% from 1.4%.

They predict that “core” inflation, excluding volatile food and energy costs, will reach 2.6% by the end of 2024, up from their previous estimate of 2.4%.

In January, core inflation stood at 2.8%, according to the Fed’s preferred measure.

Also Read | US Fed holds rates steady, foresees 3 rate cuts this year

Among other countries, Cardillo is bullish on India as he expects the economy to keep performing strongly. .

“It (India) is catching up to China and, maybe, it might surpass China over the next year or two. And if that happens, it becomes a powerhouse,” he said.

Also Read | Experts anticipate RBI to keep interest rates unchanged in April

For the entire interview, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why Standard Chartered Wealth prefers large caps in India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Standard Chartered Wealth Management has a buy recommendation on India as it believes India’s positive story will continue.

Steve Brice, Chief Investment Officer, said the investment firm favours large-cap stocks in India over small-cap and mid-cap at the moment.

The preference for large caps even though it is slightly expensive is because it is not at a cyclical peak, unlike near peak valuations in the small-cap and mid-cap space, he said.

Also, earnings are more resilient in the large cap space.

Another favourite for Standard Chartered Wealth in Asia, ex-Japan, is Korea.

“We also like Korea. So, Korea is quite a cheap area, but very close to the semiconductor story,” he noted.

Among other emerging markets, he expects another 10% upside in China in the short term.

Also Read | Stocks flat, oil climbs as dollar cornered by yen and yuan

He is overweight on Japan as well.

“I think the key story here is that Japanese investors focusing more on the domestic equity market story, and we’re seeing signs of that to some degree. But that’s the real deal. If we start seeing flows from bonds in Japan into Japanese equities, then I think the authorities have achieved a big victory.”

For more, watch the accompanying video

The US, he said, continues to remain one of their favourite markets and it has outperformed so far this year.

Given the US market’s sensitivity to tech and communication services, which are more resilient to any slowdown and growth. and benefit more from lower interest rates, the US should continue to do well in the coming months, he said.

Brice believes that if the market sees further upward inflation surprises, then that would discourage the US Federal Reserve from easing policies.

US Federal Reserve’s Governor Christopher Waller, in a recent speech at the Economic Club of New York, said that there is no rush to cut the policy rate. However, he noted that rate cuts are not off the table; perhaps it will take place sometime this year.

Commenting on next action anticipated from the US Fed, Brice said, “We had been sort of thinking that maybe the Fed might scale back a little bit on its rate cut trajectory, maybe to two rate cuts rather than three. But they doubled down on that. So these comments sort of almost go back to where we thought we might be. So it is something to watch out for.”

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Kenneth Andrade sees opportunities in these sectors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Kenneth Andrade, Founder & CEO of Old Bridge Capital Management prefers Indian pharmaceutical generics companies, and sees potential in India’s infrastructure, energy, and manufacturing sectors.

“When you combine all these sectors with manufacturing, which is a substantial part, they would make up about 50-60% of our portfolio,” said Andrade, who manages over ₹8,000 crore in funds.

Of the 23 stocks in its focused equity fund portfolio, 50% are in mid- and small caps and the balance in large-caps.

The inaugural fund for Old Bridge, an open-ended scheme, was launched in January this year.

Andrade expects commodity prices to bounce back by next year and demand to improve. Old Bridge is gradually building its portfolio with commodities linked to infrastructure such as metals or soft commodities such as agriculture.

Also Read | Digital adoption, telemedicine and e-pharmacy fuelling healthtech boom in India: HealthQuad

“Till now, agro commodities, whether it is agro chemicals, fertilizers, seeds, etc. They’ve been reasonably subpar in terms of performance, but they’ve been okay, as far as the index is concerned. But to get that, right, I think we need price inflation that comes back,” he noted.

According to data released by the commerce ministry on March 14, India’s wholesale price index for February decreased mostly because prices of manufactured goods and power dropped more. In February, wholesale prices fell to a four-month low of 0.20% compared to a 0.27% increase in January.

Also Read | India’s February wholesale inflation eases to four-month low of 0.20%

In February, manufactured product prices fell 1.27% against a 1.13% fall in the previous month, while fuel and power prices fell 1.59% from a year earlier, compared with a 0.51% drop in January. Food prices rose 4.09% year-on-year compared with an increase of 3.79% in January, while prices of primary articles were up 4.49% versus a rise of 3.84%.

For the entire interview, watch the accompanying video

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

V-Mart sees marginal demand uptick but expects challenges ahead

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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V-Mart Retail, a Gurugram-based hypermarket chain serving smaller towns, has noticed a marginal increase in demand recently. However, it still anticipates some difficulties in consumer spending in the areas where it operates.

In an interview with CNBC-TV18, Lalit Agarwal, Founder and MD of V-Mart Retail said that the cost of living has been high due to persistent inflation, causing some difficulties for consumers.

However, March should be a good month as there are a lot of marriages and festivals in the month, he said.

Also Read | India’s retail inflation at 5.09% in February, remains within the RBI tolerance band for sixth straight month

Discussing the strategies to counter the muted demand, Agarwal said, “We are focusing on improvising our internal processes, our capability to deliver better fashion to the customer, and targeting that customer. So that will also bring in some kind of result is what we expect.”

Brokerage firm Motilal Oswal, in a recent report, noted that the retail company is likely to shut down more than 15 of its stores in the January-March quarter of FY24, which is expected to help the company recover its margins and reach levels of 6-7% as the new financial year 2024-25 (FY25) begins.

Also Read | V-Mart Retail gains over 2% as Motilal Oswal initiates coverage with ‘neutral’ call

V-Mart Retail’s stock has dropped almost 10% over the past month and 21% over the last year.

For the entire interview, watch the accompanying video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Wine, spirits importers urge states for inflation-linked pricing policy as margins shrink

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Premium spirits and wine importers’ body ISWAI has urged state governments to implement an inflation-based pricing model, highlighting that industry margins have shrunk due to a rise in raw material costs. As the cost of raw materials used to produce alcohol has gone up substantially and theP of liquor has not been revised in recent years, very little is left for the trade and manufacturers while state governments are taking away as high as 60-80% of the share, according to International Spirits & Wines Association of India (ISWAI) CEO Nita Kapoor.

ISWAI is also pressing for rationalisation of excise duty imposed by some state governments, as they try to maximise the revenue collections, and said it will not help in growing volumes. “The industry and manufacturers are now facing a lot of pressure. It’s like their back against the wall because if in theP, states share is roughly about 60 to 80%, then what is being left on the trail and the sub-manufacturer is to share 20%. The gross margins are diminishing,” Kapoor told PTI.

The liquor industry is the largest income source for state governments after state taxes on petrol and diesel. The state governments are not increasing theP due to the fear of volume loss after a price increase. “The states are saying that if we maximise our collections and do not want the volumes to drop, we will hold theP. So when they would hold theP, how will I give the sub-manufacturers a price increase,” she said.

According to the association, prices of raw materials such as ENA (extra neutral alcohol) have gone up by 53% between 2018 and 2024. Similarly, prices of other materials such as glass, labels and paper packaging have gone up by 79%, 29% and 31% respectively. “The inflation is going up y-o-y. If the manufacturers do not get the price increase, if the manufacturers do not ask if the industry does not have an inflation-based pricing model, where will this industry go,” said Kapoor adding “Let us not kill the golden goose..”

ISWAI is asking for an inflation-based pricing model which is transparent, and based on data that the industry can submit. “The industry has reached the bottom of the margins. you can not kill it. It contributes 2% of the GDP. So you (state governments) need to balance ambitions,” she added.

Over the growth of the alchobev segment, Kapoor said it is witnessing a faster pace of premium products, which is above ₹900 to ₹1,000 for a bottle of 750 ml, where ISWAI members lead with domestic brands and finished products (imported/bottled at origin). Besides, low-value liquor is also selling well.

“As per my estimates by the end of the year, the industry will grow roughly about 2 to 3%… The growth will be primarily polarising- ₹900 and above and the other will be cheap liquor, which will be roughly about ₹500 or ₹600 and below,” she said adding “so we are going to see a polarized growth, a trend that started after COVID and is just picking up.”

“This industry is expected to touch about $63 billion in the next 3 to 4 years. Currently, it is somewhere between $53 billion and $55 billion. So it is going to be a pretty good growth from a value perspective,” Kapoor added. When asked about the competition faced by global brands from Indian manufacturers, which are launching their single malts, she said “the more the merrier” as the segment is very minuscule.

“If I was to include all the brands all imported brands including bottled in India, you need many more brands to come in to be able to grow the top end… There is room for everybody. I would welcome as many domestic brands being developed. Our members are also doing,” she said. ISWAI members include Bacardi, Beam Suntory, Brown Forman, Campari Group, Diageo-United Spirits, Mot Hennessy, Pernod Ricard, and William Grant & Sons, which are global leaders in the spirits and wine industries.

Several ISWAI members such as Diageo India, Pernod Ricard etc have also launched Indian single malts. “It’s good for consumers and industry… It is also good for the government’s exchequer as the taxes on premium products are far higher. So if that grows, the states will be able to have a different strategy for revenue collections,” she said.

Over the ongoing negotiations with India and the UK over the signing of a Free Trade Agreement (FTA), Kapoor said, the industry has given its representation and it is now between the two governments to decide.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

European Central Bank keeps interest rate unchanged at 4.5%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Central Bank left interest rates unchanged for a fourth meeting as a softer outlook for inflation and economic growth fed expectations for cuts to begin in June.

The deposit rate was kept at a record 4% — as all economists surveyed by Bloomberg predicted. The Governing Council reiterated that maintaining this level of borrowing costs for “sufficiently long” will make a “substantial contribution” to returning consumer-price growth to the 2% goal.

#NewsFlash | European Central Bank (#ECB) keeps interest rate unchanged at 4.5% pic.twitter.com/USRVNNIKCG

— CNBC-TV18 (@CNBCTV18Live) March 7, 2024

“The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction,” the ECB said Thursday in a statement. “Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages.”

The euro slipped after the decision, trading down 0.2% at $1.0874. Traders added to bets on monetary easing, seeing 98 basis points of rate reductions in 2024 compared with about 93 basis points previously.

The ECB, like the Federal Reserve and the Bank of England, is contemplating when to sound the all-clear on inflation and begin undoing the unprecedented monetary tightening deployed to subdue it. While price growth in the 20-nation euro zone is nearing the target, policymakers there are wary of cutting too soon and want assurance that wage increases are under control.

Their latest quarterly outlook puts inflation at 2.3% this year — down from 2.7% in December — and revises the 2025 forecast down to 2%. The economy, meanwhile, is seen expanding by 0.6% in 2024 versus 0.8% previously.

President Christine Lagarde will hold a news conference at 2:45 p.m. in Frankfurt, though several officials had to participate in this week’s meeting remotely as strikes in Germany scuppered their travel plans.

Investors will look to Lagarde for signals on whether expectations for a first rate cut in June remain valid. She may also be quizzed about a festering spat with ECB staff over freedom of debate and climate policy.

June is certainly the timeline around which the majority of officials had been converging — even if some would like swifter action as the continent’s economy struggles to exit more than a year of stagnation.

For that reason, many politicians also crave looser financial conditions. “A cut in rates could help boost growth, which is low across Europe,” Italian Finance Minister Giancarlo Giorgetti said last week. “I think I’m not the only one who shares this view.”

While policymakers are more confident that inflation is receding sustainably, most deem it too soon to declare victory and want to see more data backing the retreat before giving the green light for monetary loosening.

February inflation, at 2.6%, came in a touch stronger than expected — supporting those who don’t want to rush into lowering rates. A Nowcast compiled by Bloomberg Economics, however, shows March inflation at 2% — suggesting the ECB is closer to its target than it may think.

Whatever the reality, most policymakers are keen to examine the drip feed of wage data due over the coming months before acting. They even include doves like Greece’s Yannis Stournaras, who said recently that the ECB “won’t have enough information” to decide on cuts before June.

In the US, the Fed “does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” Chair Jerome Powell said Wednesday.

The Bank for International Settlements is similarly circumspect, warning this week that the current dominance of services in overall price growth may lead to more stubborn inflation and demand tighter policy.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow