The FOMC in its latest meeting decided to hold rates at current levels. However, it altered the language in its announcement from a tightening to a neutral bias which all but lays out the red carpet for a first rate cut in September.
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Bank of Japan increase the policy rates by 15 bps; plans quantitative tightening by halving monthly bond buying to JPY 3 trillion from existing JPY 6 trillion
Bank of Japan in it’s meeting today has increased the benchmark long term rates from 0.1% to 0.25% (increase of 15 bps against the market expectation of 10 bps). The BOJ hiking today is already as hawkish as they have been since pre-Kuroda 2011. Even the voter breakdown of the decision (7-2) is hawkish. And added to that, comments that they " will keep raising policy rate if price outlook materializes " implies that hiking is now their base case even with their CPI projections effectively not hitting below 2 pct until 2026.
In Budget 2024, the FM had reduced the period of holding of investment, remove indexation and also increase the tax rate. There is now a debate is there is a benefit to the taxpayer or it is going to increase their tax burden. In the below article, tried to capture when the changes are good to them and when not.
The Reserve Bank of India (RBI) has issued draft guidelines for the Liquidity Coverage Ratio (LCR), proposing higher runoff factors for deposits (the denominator) and increased haircuts on Government Securities (G-Secs, the numerator). This change is expected to significantly reduce the LCR ratios of banks by 10% to 20%, with some banks potentially approaching the regulatory requirement threshold of 100%.
The Finance Minister tabled the Finance Bill for the FY 2024-25. The Bill inter-alia incorporates certain amendments to the direct tax law.
Key inflation and job indices now indicate a US economy that, according to the Fed Chief, is much more balanced. Delaying rate cuts could jeopardize the prospects of a soft landing. Political pressure is also mounting ahead of the November elections.
As per news reports, Mahanagar Telephone Nigam Ltd (MTNL) has not been able to transfer sufficient funds to an escrow account for the payment of semi-annual interest coupon of one of its bond that is scheduled to be paid on 20 th July 2024.
Goods trade deficit remains elevated Goods trade deficit in June remained relatively elevated at US$21 bn, though lower than US$24 bn in May. The softening was mostly led by lower oil trade deficit. Services trade surplus was steady around the US$13 bn mark. We maintain our FY2025 CAD/GDP estimate at 1.1% (0.7% in FY2024), given firmer domestic growth relative to global growth. We retain our call for USD-INR in the 83.25-83.75 range over the near term
Expecting an all-round budget We expect the Union Budget in July to provide a combination of (1) higher capex targets, (2) higher allocation to the rural and agricultural sectors and (3) further fiscal consolidation—without shifting away from the existing prudent fiscal policy framework. In our view, (1) the RBI’s higher-than-budgeted surplus transfer (additional 0.4% of GDP) for FY2025 and (2) strong tax collections in 2MFY25 will allow the government to provide adequate support for capex and incremental support to consumption.
A transient spike in inflation CPI inflation in June increased to 5.1% from 4.8% in May due to a spike in vegetable prices. Prior to this price increase, the June CPI inflation print was expected at around 4.4%. We expect this spike to be transient and reverse 2-3 months later. We maintain our FY2025 average CPI inflation estimate at 4.5%. We continue with our call for a shallow rate cut cycle, starting in the December policy.
FY2025 monsoon: monsoon remains normal – Till July 12, cumulative rainfall was 2.8% below long-term average while weekly rainfall was 5.6% below long-term average. On a cumulative basis, rainfall was normal in southern India, north-west India, and east and north-east India, and below normal in central India (slide 3). Out of the 36 sub-divisions, till date, 11 have received deficient rainfall, 18 have received normal rainfall, and seven have received excess rainfall
The global economic outlook for 2024 appears optimistic, with the International Monetary Fund (IMF) projecting steady growth across various economies. This positive sentiment is mirrored in India, where several key economic indicators have shown significant improvement, leading to an upgraded outlook on the country's sovereign rating by S&P.
Private Final Consumption Expenditure (PFCE) is a key component of Gross Domestic Product (GDP) and serves as a critical indicator of the economic health and well-being of a country. PFCE represents the total expenditure on goods and services by households and non-profit institutions serving households (NPISHs) within a given period. It includes spending on durable goods, non-durable goods, and services, reflecting the consumption patterns and living standards of the population.
Fiscal prudence, the practice of managing government spending and taxation with caution and foresight, is fundamental to maintaining macroeconomic stability. This principle ensures that government budgets are sustainable and not prone to excessive deficits or debt accumulation, which can lead to financial crises or economic instability. By adhering to fiscal prudence, governments can foster an environment conducive to steady growth, low inflation, and resilient economic performance.
India’s Gambling Industry Late in 2022, a significant research report by SEBI, India’s market regulator, revealed that derivatives trading is largely a losing endeavor for investors. The study found that 89 percent of investors lost money, while only 11 percent made profits. Warren Buffett famously called derivatives “financial weapons of mass destruction,” and although he referred to the economy as a whole, this statement is just as true for individuals, as demonstrated by SEBI’s study.
J une's First Fortnight: Central Bank Actions The initial two weeks of June witnessed significant movements from major central banks. The Bank of Japan (BOJ), Federal Reserve (Fed), Reserve Bank of India (RBI), and European Central Bank (ECB) all made critical policy decisions that set the tone for financial markets.
Weak Monsoon Till June 28, cumulative rainfall was 14.5% below the long-term average while weekly rainfall was 8.3% above the long-term average. On a cumulative basis, rainfall was above normal in southern India while deficient in the rest of India. This indicated higher inflation.
Higher inflation generally leads to higher interest rates. Here's how the process typically works: