Fed forecast inflation

Jayanth Varma, one of the three external members of the Reserve Bank of India's Monetary Policy Committee (MPC), has said the rate-setting panel's members should start taking the first steps to providing interest rates projections by initially giving their individual views on where they see the policy rate in the near-term. "I believe it is possible to start with baby steps and proceed gradually towards the desired goal," Varma told Moneycontrol via e-mail. "It is possible to start with projections only for the next quarter and slowly expand the horizon. It is possible to begin with broad ranges for the policy rate and then progressively refine the range. These are all matters of implementation detail. The important thing is to have a consensus on whether this is worth doing." Varma's comments come after he was cited as saying in the minutes of the June 6-8 meeting, released on June 22, that the time was "ripe" for the committee's members to start moving towards providing … [Read more...] about MPC members can start with near-term interest rate forecasts, says Jayanth Varma

Share to Twitter Share to Linkedin Topline Stocks fell slightly on Wednesday as a growing number of major Wall Street firms warned that the likelihood of a recession has risen sharply, while Federal Reserve Chair Jerome Powell pledged that the central bank is “ strongly committed ” to raising rates until inflation moderates. Key Facts Markets finished lower in choppy trading: The Dow Jones Industrial Average fell 0.2%, less than 100 points, while the S&P 500 lost 0.1% and the tech-heavy Nasdaq Composite 0.2%. The Dow was down by as much as 400 points but stocks pared back losses following comments from Fed Chair Powell, who said the central bank is “determined to take the measures necessary to restore price stability” and that “ongoing rate increases will be appropriate.” Citigroup became the latest Wall Street bank to increase its recession odds, meanwhile, forecasting a 50% chance of a downturn as consumer demand “looks to be … [Read more...] about Stocks Fall After Powell Pledges More Big Rate Hikes To Combat Inflation

RBI Governor Shaktikanta Das (File image) The Reserve Bank of India (RBI) is “well on track” to bringing down inflation and inflation expectations in the economy against the backdrop of supply side disruptions, the governor said. “Until December, CPI (Consumer Price Index) inflation is expected to remain higher than the upper tolerance level; thereafter it is expected to go below 6 percent as per our current projections,” Shaktikanta Das said in an interview to The Times of India. "There will be inflationary pressures, and only in the fourth quarter, we have projected it to go below 6 percent.” The governor acknowledged that high inflation hurts people the most, especially the lower segment of society which is hit the hardest. Hence, it is desirable that the country has a framework for inflation and that monetary policy operates within that, Das said. The RBI’s analysis shows that when consumer inflation exceeds 6 percent, it is negative for growth, he said, adding … [Read more...] about RBI well on track to bringing down inflation, says Governor Shaktikanta Das

Share to Twitter Share to Linkedin Topline The stock market rebounded strongly on Friday, posting its first positive week this month as recession fears subsided somewhat thanks to positive economic data suggesting that inflation may have peaked, while some experts expressed optimism about the health of the economy. Key Facts Stocks snapped a three-week losing streak on Friday: The Dow Jones Industrial Average rose 2.7%, over 800 points, while the S&P 500 jumped 3.1% and the tech-heavy Nasdaq Composite 3.3%. Markets got a boost after the latest consumer sentiment survey from the University of Michigan showed that inflation expectations eased slightly in June, rising 5.3% compared to a year ago—but lower than the 5.4% expected. Investors also cheered optimistic remarks about the economy from St. Louis Federal Reserve President James Bullard, who said that recession fears are “overblown” and consumer spending remains strong. Stocks … [Read more...] about Dow Jumps 800 Points, Stocks Snap Three-Week Losing Streak After Inflation Expectations Ease

Share to Twitter Share to Linkedin Topline As a growing number of investment banks and company chiefs warn that the likelihood of a recession is increasing, analysts at Morgan Stanley are telling clients that the stock market—despite reeling from a steep selloff in recent weeks—has plenty of room to fall before hitting levels consistent with recession-era lows, which would be especially bad for cyclical industries like travel and hospitality. Key Facts Despite major stock indexes plunging more than 20% below recent highs, markets are still only down by about 60% of the average drawdown compared with previous recessions (which denote two consecutive quarters of negative GDP growth), Morgan Stanley analysts told clients in a Tuesday note. As the Federal Reserve works to combat decades-high inflation with interest rate hikes that will likely stunt economic growth, a recession “is no longer just a tail risk,” analysts led by Michael Wilson wrote, … [Read more...] about Stock Market Could Crash Another 20% If U.S. Plunges Into Recession—These Industries Are Most At Risk

UOB: Room for Bank Negara to hike OPR by another 50bps before end-September - A + A KUALA LUMPUR (June 22): There is growing pressure on Bank Negara Malaysia to hike rates faster in the face of an aggressive US Federal Reserve, while there is widening consensus that global food and energy prices will continue to stay elevated for longer, with any potential supply shocks seen capable of driving prices and inflation even higher. In a note on Wednesday, UOB Global Economics and Market Research cautioned that the key takeaway is that "doing nothing or acting too slow" could sow seeds of more persistent and elevated inflation in the future, with more negative effects on demand and the economy. "Rate hikes would then also need to be sharper and more abrupt in that scenario. There may also be a need to act faster now in order to have sufficient policy buffers in preparation for the next recession (when it happens). A lagged policy response by BNM relative to peers … [Read more...] about Growing pressure on Bank Negara to hike rates faster

- A + A (June 22): Federal Reserve Chair Jerome Powell said the Central Bank will keep raising interest rates to tame inflation and conceded that a US recession was “certainly a possibility”. “We anticipate that ongoing rate increases will be appropriate,” Powell said Wednesday in his semiannual testimony to the Senate Banking Committee. “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook.” Powell’s remarks largely reiterated comments at a press conference last week after he and his colleagues on the Federal Open Market Committee raised their benchmark lending rate 75 basis points — the biggest increase since 1994 — to a range of 1.5% to 1.75%. While Powell told reporters last week that another 75 basis-point increase, or a 50 basis-point move, was on the table for the next meeting in late July, Wednesday’s text made … [Read more...] about Powell sees ongoing rate hikes, says recession a ‘possibility’

- A + A BENGALURU (June 23): The Indonesian rupiah held steady on Thursday (June 23) after the country's central bank left interest rates at a record low, while the Philippine peso hovered near its lowest level in 16 and a half years following a 25-basis-point rate hike. The rupiah was 0.2% higher, clinging to its earlier levels after Bank Indonesia (BI) acted as widely expected, balancing the need to support economic growth while maintaining stability in the currency. The BI's decision will put further pressure on the currency, said Fakhrul Fulvian, an economist at Trimegah Securities. "Stability in IDR (the rupiah) can only be achieved once BI clearly states its intention to start the tightening cycle seriously," he said. "Commodity windfall, rupiah's relative outperformance as well as a higher subsidy budget have provided room for BI to bide time and not join regional peers, for instance the Philippines, in tightening policy reins," said Radhika Rao, a senior … [Read more...] about Philippine peso hovers near 16-1/2-year low, Indonesian rupiah steady

Share to Twitter Share to Linkedin Topline A White House economic adviser, Heather Boushey, on Tuesday said she is “optimistic” the U.S. economy will not fall into a recession, joining a chorus of Biden Administration officials who pushed back against the contention that an economic downturn is inevitable. Key Facts Speaking at an event hosted by the Washington Post , Boushey said she believes there will not be a scenario “that will lead to the kinds of scarring of American families that we really don't want to see.” Boushey pointed to the country’s low unemployment rate, strong household balance sheets, and robustness in the face of the pandemic as the reasons behind her optimism. In an interview on Sunday, President Joe Biden insisted a recession was not “inevitable,” also pointing to the country’s low unemployment numbers as he urged people to not simply believe “a warning” about an impending downturn. The president also … [Read more...] about Here’s Why Biden Administration Officials Think A Recession Can Be Avoided

- A + A (June 23): Bonds in Southeast Asia are at risk of a selloff as the Federal Reserve’s hawkish posture pushes Central Banks in the region to hike rates aggressively. Benchmark rates in the region are close to record lows, and policy makers will be forced to act due to the double whammy from US rate hikes and surging domestic price pressures. Investor skepticism on the patient policy stance adopted by local central banks is deepening as inflationary pressures refuse to ebb across the globe. “The larger Fed hike raises the risks for more tightening in Southeast Asian economies, with rising domestic inflation in the region still the primary consideration,” said Maximillian Lin, Asia rates and currency strategist at Credit Suisse Group AG in Singapore. “In the short-term, we expect the selloff in Treasuries to put pressure on Southeast Asian local currency bonds.” The following four charts highlight how regional policy rates and sovereign bond yields have … [Read more...] about Rates divergence leads to ever bigger stress in EM Asia’s bonds