US President Donald Trump has renewed his effort to remove Federal Reserve Governor Lisa Cook, reigniting a major legal and political battle over presidential power and the independence of America's central bank.

The Trump administration is seeking Cook's removal over allegations involving mortgage documents from 2021, before she joined the Federal Reserve in 2022. Trump has accused Cook of mortgage fraud, while Cook denies wrongdoing and her lawyers have called the allegations baseless and politically motivated.

The Supreme Court previously ruled 5–4 that Cook could remain in her position while she challenges her removal, finding that she had not been given the required procedural protections. However, the ruling did not permanently prevent Trump from attempting to remove her again.

Chief Justice John Roberts indicated that the president could pursue removal if Cook received proper notice and an opportunity to respond. Cook's deadline to respond is August 26.

Trump Renews Effort to Fire Fed Governor Lisa Cook | Battle Over Federal Reserve Independence

Global central banks representing economies that account for nearly two-fifths of global output are expected to keep interest rates steady in the coming week, as policymakers grapple with an uncertain outlook shaped by escalating trade disputes and renewed geopolitical instability.&nbsp;With fresh tensions flaring between Israel and Iran and continuing disruptions from protectionist policies led by the US, central bankers appear to be exercising extreme caution.Officials in the US, UK, Japan, Norway, and Brazil are among those expected to pause any immediate monetary shifts. The sentiment is mirrored by the Paris-based OECD (Organisation for Economic Co-operation and Development), which recently downgraded its global growth forecasts, citing intensifying trade tensions as a key driver of inflationary pressures and reduced investment activity.<h2>US and Canada: Inflation jitters amid weak consumer demand</h2>All eyes are on the US Federal Reserve, which will meet on Wednesday, just as President Donald Trump approaches his 150th day in office. The Fed is not expected to make any changes, given uncertainties over the long-term economic impact of the administration’s trade policies.&nbsp;Recent data suggests a dip in May retail sales, particularly in automobile purchases, though underlying figures excluding autos and fuel may show slight improvement.Also on the radar are housing starts and industrial production. Manufacturing output is expected to decline for a second consecutive month, reflecting a sector reeling from tariff-related unpredictability.In Canada, the focus will shift to Prime Minister Mark Carney's efforts at the G-7 summit and the Bank of Canada’s policy deliberations. While the central bank held rates steady in its last meeting, it hinted at a possible cut if economic growth softens further. Key indicators such as April retail sales and migration data will be closely watched.<h2>Asia: Holding steady as risks mount</h2>Across Asia, most central banks are set to adopt a wait-and-see approach. The Bank of Japan, despite persistent inflationary struggles, is unlikely to change interest rates. Investors are instead watching for changes in its bond-buying operations, with many anticipating a deceleration.Central banks in Indonesia, Taiwan, and China are also expected to maintain the status quo, the latter holding its loan prime rates steady. The Philippines may buck the trend with a modest rate cut of 25 basis points, driven by easing inflation.China will release a broad set of economic data, including retail sales, industrial production, and employment. While industrial activity may show resilience due to frontloaded manufacturing, property investment is expected to remain weak.&nbsp;Japan, meanwhile, will publish export and inflation data, both of which may reflect the toll of US trade policies.In Israel, inflation is projected to have eased slightly in May. The country’s central bank has held rates at 4.5 per cent for over a year amid persistent regional instability.&nbsp;<h2>Europe and Africa: Oil spike complicates BOE path</h2>In the UK, the Bank of England (BOE) is anticipated to maintain rates at 4.25 per cent, even as inflation remains stubbornly above target at 3.4 per cent.&nbsp;The recent spike in oil prices, triggered by Israel’s strike on Iran’s nuclear program, adds to inflation risks, complicating future rate-cut paths. Analysts predict a 7-2 vote in favour of keeping rates unchanged, with gradual easing likely in the months ahead.The European Central Bank (ECB) will be active on the speaking circuit, with appearances from top officials including President Christine Lagarde. Economic sentiment and consumer confidence data from the eurozone may offer clues on business and consumer reactions to ongoing uncertainties.Meanwhile, South Africa will release inflation data and a financial stability review, both likely to support the case for steady policy.<h2>Latin America: Mixed outlooks amid local challenges</h2>Brazil and Chile are also expected to hold rates, though inflation trends suggest differing paths ahead. After a recent favourable inflation report, Brazil’s central bank is likely to keep its benchmark rate at 14.75 per cent for now, holding off on further tightening.&nbsp;Chile’s policymakers, facing a more subdued inflation environment, may keep rates at 5 per cent while signalling future easing.Economic indicators from Colombia and retail data from Brazil will provide further insight into how resilient household demand remains in the face of global headwinds.With policymakers digesting the impacts of trade disruptions and geopolitical shocks, most central banks are choosing to remain on hold. The prevailing sentiment across major economies is one of watchful inaction, as inflationary risks collide with concerns about slowing growth.&nbsp;As the second half of the year unfolds, the pace and direction of monetary policy will largely depend on how global trade and security dynamics evolve.

With fresh tensions flaring between Israel and Iran and continuing disruptions from protectionist policies led by the US, central bankers appear to be exercising extreme caution.

Global central banks representing economies that account for nearly two-fifths of global output are expected to keep interest rates steady in the coming week, as policymakers grapple with an uncertain outlook shaped by escalating trade disputes and renewed geopolitical instability. With fresh tensions flaring between Israel and Iran and continuing disruptions from protectionist policies led by the US, central bankers appear to be exercising extreme caution. Officials in the US, UK, Japan, Norway, and Brazil are among those expected to pause any immediate monetary shifts. The sentiment is mirrored by the Paris-based OECD (Organisation for Economic Co-operation and Development), which recently downgraded its global growth forecasts, citing intensifying trade tensions as a key driver of inflationary pressures and reduced investment activity. US and Canada: Inflation jitters amid weak consumer demand All eyes are on the US Federal Reserve, which will meet on Wednesday, just as President Donald Trump approaches his 150th day in office. The Fed is not expected to make any changes, given uncertainties over the long-term economic impact of the administration’s trade policies. Recent data suggests a dip in May retail sales, particularly in automobile purchases, though underlying figures excluding autos and fuel may show slight improvement. Also on the radar are housing starts and industrial production. Manufacturing output is expected to decline for a second consecutive month, reflecting a sector reeling from tariff-related unpredictability. In Canada, the focus will shift to Prime Minister Mark Carney's efforts at the G-7 summit and the Bank of Canada’s policy deliberations. While the central bank held rates steady in its last meeting, it hinted at a possible cut if economic growth softens further. Key indicators such as April retail sales and migration data will be closely watched. Asia: Holding steady as risks mount Across Asia, most central banks are set to adopt a wait-and-see approach. The Bank of Japan, despite persistent inflationary struggles, is unlikely to change interest rates. Investors are instead watching for changes in its bond-buying operations, with many anticipating a deceleration. Central banks in Indonesia, Taiwan, and China are also expected to maintain the status quo, the latter holding its loan prime rates steady. The Philippines may buck the trend with a modest rate cut of 25 basis points, driven by easing inflation. China will release a broad set of economic data, including retail sales, industrial production, and employment. While industrial activity may show resilience due to frontloaded manufacturing, property investment is expected to remain weak. Japan, meanwhile, will publish export and inflation data, both of which may reflect the toll of US trade policies. In Israel, inflation is projected to have eased slightly in May. The country’s central bank has held rates at 4.5 per cent for over a year amid persistent regional instability. Europe and Africa: Oil spike complicates BOE path In the UK, the Bank of England (BOE) is anticipated to maintain rates at 4.25 per cent, even as inflation remains stubbornly above target at 3.4 per cent. The recent spike in oil prices, triggered by Israel’s strike on Iran’s nuclear program, adds to inflation risks, complicating future rate-cut paths. Analysts predict a 7-2 vote in favour of keeping rates unchanged, with gradual easing likely in the months ahead. The European Central Bank (ECB) will be active on the speaking circuit, with appearances from top officials including President Christine Lagarde. Economic sentiment and consumer confidence data from the eurozone may offer clues on business and consumer reactions to ongoing uncertainties. Meanwhile, South Africa will release inflation data and a financial stability review, both likely to support the case for steady policy. Latin America: Mixed outlooks amid local challenges Brazil and Chile are also expected to hold rates, though inflation trends suggest differing paths ahead. After a recent favourable inflation report, Brazil’s central bank is likely to keep its benchmark rate at 14.75 per cent for now, holding off on further tightening. Chile’s policymakers, facing a more subdued inflation environment, may keep rates at 5 per cent while signalling future easing. Economic indicators from Colombia and retail data from Brazil will provide further insight into how resilient household demand remains in the face of global headwinds. With policymakers digesting the impacts of trade disruptions and geopolitical shocks, most central banks are choosing to remain on hold. The prevailing sentiment across major economies is one of watchful inaction, as inflationary risks collide with concerns about slowing growth. As the second half of the year unfolds, the pace and direction of monetary policy will largely depend on how global trade and security dynamics evolve.

With fresh tensions flaring between Israel and Iran and continuing disruptions from protectionist policies led by the US, central bankers appear to be exercising extreme caution.

Central banks set to hold rates amid trade disruptions, Central Asian tensions

The Bank of England's (BoE) Monetary Policy Committee (MPC) has voted to lower the benchmark bank rate by 0.25 percentage points to 4.25 per cent, marking a cautious step towards easing policy amid ongoing progress on disinflation.
&nbsp;
This decision, announced on May 08, was passed by a narrow majority of 5-4. While two members advocated for a more significant 0.5 percentage point cut to 4 per cent, and two others argued to keep the rate unchanged at 4.5 per cent.&nbsp;
&nbsp;
The cut had been widely expected, especially after a slowdown in price rises, with inflation cooling to 2.6 per cent in the twelve months to March (from 2.8 per cent in February), as energy prices have retreated and the restrictive monetary stance has helped contain second-round inflationary effects.
&nbsp;
Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory to guard against any persistent inflation pressures. The committee noted that inflationary risks could still shift in either direction, with global trade uncertainties and tariff-related volatility contributing to market fluctuations.
&nbsp;
&ldquo;We expect an increase in inflation this year. It is likely to rise temporarily to 3.7 per cent, partly because of higher energy prices. Inflation is expected to fall back to the 2 per cent target after that&hellip;There is also a lot of uncertainty from global developments, partly because of changes in global trade policies. We are assessing what this could mean for UK inflation closely,&rdquo; said BoE Governor Andrew Bailey.
&nbsp;
&ldquo;We need to be confident that inflation will remain low and stable in a lasting way. We will decide carefully how much further and how fast we can cut interest rates,&rdquo; he added.
&nbsp;
<h2>UK economy's health check</h2>
&nbsp;
The UK economy has shown signs of slowing growth, with GDP growth decelerating since mid-2024 and the labour market loosening. Wage growth, though still elevated, is expected to decline sharply later in the year. Energy prices have fallen, but increases earlier in the year are still expected to push inflation back up to 3.5 per cent by the third quarter of 2025 before easing once more.
&nbsp;
The underlying GDP growth is expected to have been around zero in 2025 Q1, well below the central bank&rsquo;s projection for headline growth of 0.6 per cent. The S&amp;P Global UK composite output PMI declined significantly in April, suggesting downside risks around the near-term outlook. Household spending growth has remained subdued over recent quarters, although real incomes have risen quite strongly such that the saving ratio increased to 11.6 per cent in 2024 Q4, its highest level since the pandemic.
&nbsp;
The country&rsquo;s employment growth has also softened recently, and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level.
&nbsp;
The central bank's May Report sets out two illustrative scenarios. In one scenario, there could be weaker supply and more persistence in domestic wages and prices, including from second-round effects related to the near-term increase in CPI inflation. In another scenario, inflationary pressures could ease more quickly owing to greater or longer-lasting weakness in demand relative to supply, in part reflecting uncertainties globally and domestically.
&nbsp;
The committee emphasised that monetary policy is not on a preset path and will be responsive to changes in the economic landscape.
&nbsp;
The future decisions on interest rates will depend on how inflation and the economy evolve, with the goal of returning inflation to the 2 per cent target in the medium term, the committee said in a statement.
&nbsp;
<h2>Who will it help?</h2>
&nbsp;
The Bank of England&rsquo;s recent 25-basis-point interest rate cut is set to benefit homeowners, particularly those looking to buy or remortgage. With a significant portion of UK homeowners on fixed-rate mortgages, the rate reduction is beneficial for those whose fixed-rate terms are ending in 2025, as it could lead to cheaper mortgage deals. While the cut won&rsquo;t impact those with existing fixed-rate mortgages, experts say it may help stimulate the housing market by improving affordability and providing lenders with room to compete, particularly among first-time buyers.
&nbsp;
In addition to this, the rate cut is also expected to benefit consumers and businesses. Borrowers with credit cards and personal loans may see lower interest rates, depending on their credit history. For businesses, particularly small and medium-sized enterprises, lower rates could make borrowing cheaper, providing relief after recent cost increases like the national minimum wage hike. With reduced borrowing costs, firms may have more cash for investment, potentially boosting consumer confidence and spending, helping the UK economy recover.

Business & Economy: Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory

The Bank of England's (BoE) Monetary Policy Committee (MPC) has voted to lower the benchmark bank rate by 0.25 percentage points to 4.25 per cent, marking a cautious step towards easing policy amid ongoing progress on disinflation. This decision, announced on May 08, was passed by a narrow majority of 5-4. While two members advocated for a more significant 0.5 percentage point cut to 4 per cent, and two others argued to keep the rate unchanged at 4.5 per cent. The cut had been widely expected, especially after a slowdown in price rises, with inflation cooling to 2.6 per cent in the twelve months to March (from 2.8 per cent in February), as energy prices have retreated and the restrictive monetary stance has helped contain second-round inflationary effects. Despite the recent decline in inflation, the MPC remains cautious, stating that interest rates will need to stay in restrictive territory to guard against any persistent inflation pressures. The committee noted that inflationary risks could still shift in either direction, with global trade uncertainties and tariff-related volatility contributing to market fluctuations. “We expect an increase in inflation this year. It is likely to rise temporarily to 3.7 per cent, partly because of higher energy prices. Inflation is expected to fall back to the 2 per cent target after that…There is also a lot of uncertainty from global developments, partly because of changes in global trade policies. We are assessing what this could mean for UK inflation closely,” said BoE Governor Andrew Bailey. “We need to be confident that inflation will remain low and stable in a lasting way. We will decide carefully how much further and how fast we can cut interest rates,” he added. UK economy's health check The UK economy has shown signs of slowing growth, with GDP growth decelerating since mid-2024 and the labour market loosening. Wage growth, though still elevated, is expected to decline sharply later in the year. Energy prices have fallen, but increases earlier in the year are still expected to push inflation back up to 3.5 per cent by the third quarter of 2025 before easing once more. The underlying GDP growth is expected to have been around zero in 2025 Q1, well below the central bank’s projection for headline growth of 0.6 per cent. The S&P Global UK composite output PMI declined significantly in April, suggesting downside risks around the near-term outlook. Household spending growth has remained subdued over recent quarters, although real incomes have risen quite strongly such that the saving ratio increased to 11.6 per cent in 2024 Q4, its highest level since the pandemic. The country’s employment growth has also softened recently, and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level. The central bank's May Report sets out two illustrative scenarios. In one scenario, there could be weaker supply and more persistence in domestic wages and prices, including from second-round effects related to the near-term increase in CPI inflation. In another scenario, inflationary pressures could ease more quickly owing to greater or longer-lasting weakness in demand relative to supply, in part reflecting uncertainties globally and domestically. The committee emphasised that monetary policy is not on a preset path and will be responsive to changes in the economic landscape. The future decisions on interest rates will depend on how inflation and the economy evolve, with the goal of returning inflation to the 2 per cent target in the medium term, the committee said in a statement. Who will it help? The Bank of England’s recent 25-basis-point interest rate cut is set to benefit homeowners, particularly those looking to buy or remortgage. With a significant portion of UK homeowners on fixed-rate mortgages, the rate reduction is beneficial for those whose fixed-rate terms are ending in 2025, as it could lead to cheaper mortgage deals. While the cut won’t impact those with existing fixed-rate mortgages, experts say it may help stimulate the housing market by improving affordability and providing lenders with room to compete, particularly among first-time buyers. In addition to this, the rate cut is also expected to benefit consumers and businesses. Borrowers with credit cards and personal loans may see lower interest rates, depending on their credit history. For businesses, particularly small and medium-sized enterprises, lower rates could make borrowing cheaper, providing relief after recent cost increases like the national minimum wage hike. With reduced borrowing costs, firms may have more cash for investment, potentially boosting consumer confidence and spending, helping the UK economy recover.

Bank of England reduces interest rates to 4.25% as tariffs hit growth

The Monetary Policy Committee (MPC) kickstarted the low repo rate cycle on 7 February 2025 with a 25-basis points rate cut. In the coming weeks and months, it is expected to bring down the interest rates slowly but steadily, keeping in mind global macro-economic situations. For Fixed Deposit (FD) investors, this means that the attractive FD rates seen in recent months may not last indefinitely. This raises an important question: Should investors rethink their strategy and explore alternatives such as debt mutual funds and bonds?
<h2>Who Should Stick to FDs?</h2>
Depending on whom you are talking to, you may find FDs to be much maligned or right up on a pedestal. Nevertheless, FDs continue to be a reliable investment option that offers a combination of returns and capital protection. There are clear-cut instances where it is smarter to invest in an FD over any other financial instrument. Here are five situations where you should continue investing in FDs:
Capital protection is a priority: No one can afford to always take the same amount of risk for every investment. Investments that are exposed to market volatility may not be always appropriate. Bank FDs offer assured returns, making them ideal low risk-moderate return investments.
You need stable and predictable returns: Market-linked instruments may give you higher returns over time, but you cannot predict how much that will finally amount to. Unlike these, FDs provide a guaranteed interest rate, unaffected by market fluctuations. So, if you are looking to accumulate a certain amount of money within a fixed time, FDs are a better bet.
You need funds for short-term goals: Macro-economic trends indicate a volatile couple of years. Even otherwise, market cycles tend to be long. If you require liquidity within 1-3 years, short-term FDs can be a safer bet than debt funds, which are expected to see price fluctuations in the near future.
You fall in a lower tax bracket: Since FD interest is taxed at your income tax slab, if you are in the lower tax brackets, your tax liability may be much lower and your overall returns from FDs may be higher.
You do not want to track the market: The terms and conditions of the FD does not change during the deposit period even if the markets turn or the repo rate increases or decreases. So FDs require minimal monitoring.
<h2>Who Should Consider Alternatives?</h2>
There are several reasons to explore alternatives to FDs. If you have a long investment window, you be better off with equity funds that give you a much higher inflation-proof returns. The taxation on these is also a flat 12.5% on gains of above Rs.1.25L in a year. FDs on the other hand will be taxed as per your income tax slab.
Unlike FDs, where premature withdrawals incur penalties, debt funds allow easy redemption with little to no exit load after a few months. This comes in handy if you need additional liquidity but are unable to anticipate in advance exactly when you would need it. Finally, if you are looking for diversification, holding a mix of FDs, bonds, and debt and index funds can help balance safety, liquidity, and returns in your portfolio.
<h2>What Should You Do Post-MPC?</h2>
With rates expected to fall, stick to short-term FDs for stability if you have an investment window of 2-3 years or less. If you are looking at 3&ndash;5-year investments, consider a mix of FDs and high-rated corporate bonds to get stability and slightly better returns. Look to equity for long-term investments of over 5 years as they could offer much higher returns and be more tax-efficient, especially in high-income tax brackets.
If you are a risk-averse senior citizen, special senior citizen FD schemes offering higher interest rates (7.5%&ndash;8%) remain an attractive option.
<h2>Conclusion</h2>
While FDs remain a safe and simple investment, if you are looking for higher diversity and flexibility, you may want to consider debt mutual funds and bonds. The MPC&rsquo;s steady interest rate decision gives investors a window to lock in FD rates before potential cuts in the future. However, for those seeking higher inflation-adjusted returns, diversifying into debt funds and bonds may be a prudent strategy. Ultimately, the right choice depends on your financial goals, tax situation, and risk tolerance.

Business & Economy: For Fixed Deposit (FD) investors, this means that the attractive FD rates seen in recent months may not last indefinitely.

The Monetary Policy Committee (MPC) kickstarted the low repo rate cycle on 7 February 2025 with a 25-basis points rate cut. In the coming weeks and months, it is expected to bring down the interest rates slowly but steadily, keeping in mind global macro-economic situations. For Fixed Deposit (FD) investors, this means that the attractive FD rates seen in recent months may not last indefinitely. This raises an important question: Should investors rethink their strategy and explore alternatives such as debt mutual funds and bonds? Who Should Stick to FDs? Depending on whom you are talking to, you may find FDs to be much maligned or right up on a pedestal. Nevertheless, FDs continue to be a reliable investment option that offers a combination of returns and capital protection. There are clear-cut instances where it is smarter to invest in an FD over any other financial instrument. Here are five situations where you should continue investing in FDs: Capital protection is a priority: No one can afford to always take the same amount of risk for every investment. Investments that are exposed to market volatility may not be always appropriate. Bank FDs offer assured returns, making them ideal low risk-moderate return investments. You need stable and predictable returns: Market-linked instruments may give you higher returns over time, but you cannot predict how much that will finally amount to. Unlike these, FDs provide a guaranteed interest rate, unaffected by market fluctuations. So, if you are looking to accumulate a certain amount of money within a fixed time, FDs are a better bet. You need funds for short-term goals: Macro-economic trends indicate a volatile couple of years. Even otherwise, market cycles tend to be long. If you require liquidity within 1-3 years, short-term FDs can be a safer bet than debt funds, which are expected to see price fluctuations in the near future. You fall in a lower tax bracket: Since FD interest is taxed at your income tax slab, if you are in the lower tax brackets, your tax liability may be much lower and your overall returns from FDs may be higher. You do not want to track the market: The terms and conditions of the FD does not change during the deposit period even if the markets turn or the repo rate increases or decreases. So FDs require minimal monitoring. Who Should Consider Alternatives? There are several reasons to explore alternatives to FDs. If you have a long investment window, you be better off with equity funds that give you a much higher inflation-proof returns. The taxation on these is also a flat 12.5% on gains of above Rs.1.25L in a year. FDs on the other hand will be taxed as per your income tax slab. Unlike FDs, where premature withdrawals incur penalties, debt funds allow easy redemption with little to no exit load after a few months. This comes in handy if you need additional liquidity but are unable to anticipate in advance exactly when you would need it. Finally, if you are looking for diversification, holding a mix of FDs, bonds, and debt and index funds can help balance safety, liquidity, and returns in your portfolio. What Should You Do Post-MPC? With rates expected to fall, stick to short-term FDs for stability if you have an investment window of 2-3 years or less. If you are looking at 3–5-year investments, consider a mix of FDs and high-rated corporate bonds to get stability and slightly better returns. Look to equity for long-term investments of over 5 years as they could offer much higher returns and be more tax-efficient, especially in high-income tax brackets. If you are a risk-averse senior citizen, special senior citizen FD schemes offering higher interest rates (7.5%–8%) remain an attractive option. Conclusion While FDs remain a safe and simple investment, if you are looking for higher diversity and flexibility, you may want to consider debt mutual funds and bonds. The MPC’s steady interest rate decision gives investors a window to lock in FD rates before potential cuts in the future. However, for those seeking higher inflation-adjusted returns, diversifying into debt funds and bonds may be a prudent strategy. Ultimately, the right choice depends on your financial goals, tax situation, and risk tolerance.

Should You Rethink Your FD Strategy Post MPC?

In a much-anticipated move, the Reserve Bank of India's six-member Monetary Policy Committee has kept the repo rate unchanged at 6.5 per cent for the ninth time in a row, citing risks from higher food inflation. It also retained the stance on withdrawal of accommodation.

Making the announcement, Reserve Bank of India Governor Shaktikanta Das said that inflation also remained broadly on a falling trajectory. Repo rate was last cut by 40 basis points to 4 per cent in May 2020 in view of the economic disruption triggered by the COVID-19 pandemic that had brought demand to a near standstill, forced production cuts, and laid-off millions of jobs. Since then, the central bank has hiked the repo rate by 250 basis points to 6.50 per cent at present to fight high inflation levels after the epidemic subsided.

The resolution to retain the status quo on the repo rate at 6.5 per cent means all the external benchmark lending rates (EBLR) linked to the repo rate will continue to remain unchanged, bringing relief to borrowers as their equated monthly instalments (EMIs) will not increase. It is in response to this cumulative 250 bps policy rate increase that banks have aligned their repo-linked EBLRs upwards since May 2022. Further, the 1-year median marginal cost of funds-based rate (MCLR) of banks increased to 168 bps from May 2022–June 2024.

In a much-anticipated move, the Reserve Bank of India's six-member Monetary Policy Committee has kept the repo rate unchanged at 6.5 per cent for the ninth time in a row, citing risks from higher food inflation.

In a much-anticipated move, the Reserve Bank of India's six-member Monetary Policy Committee has kept the repo rate unchanged at 6.5 per cent for the ninth time in a row, citing risks from higher food inflation. It also retained the stance on withdrawal of accommodation. Making the announcement, Reserve Bank of India Governor Shaktikanta Das said that inflation also remained broadly on a falling trajectory. Repo rate was last cut by 40 basis points to 4 per cent in May 2020 in view of the economic disruption triggered by the COVID-19 pandemic that had brought demand to a near standstill, forced production cuts, and laid-off millions of jobs. Since then, the central bank has hiked the repo rate by 250 basis points to 6.50 per cent at present to fight high inflation levels after the epidemic subsided. The resolution to retain the status quo on the repo rate at 6.5 per cent means all the external benchmark lending rates (EBLR) linked to the repo rate will continue to remain unchanged, bringing relief to borrowers as their equated monthly instalments (EMIs) will not increase. It is in response to this cumulative 250 bps policy rate increase that banks have aligned their repo-linked EBLRs upwards since May 2022. Further, the 1-year median marginal cost of funds-based rate (MCLR) of banks increased to 168 bps from May 2022–June 2024.

RBI keeps repo rate intact amid fears of inflation, provides relief to borrowers

In a change of leadership, Fatih Karahan took the helm as the new governor of Turkey's central bank, replacing Hafize Gaye Erkan. <o:p></o:p>

Karahan, a 42-year-old economist with a University of Pennsylvania economics PhD, emphasised his commitment to a stringent monetary policy aimed at curbing inflation. <o:p></o:p>

"We will be watchful of inflation expectations and pricing behavior. We stand ready to act in case of any deterioration in the inflation outlook," Reuters quoted Karahan as saying.<o:p></o:p>

This move comes on the heels of Erkan's resignation, who cited the need to protect her family amid what she described as a "reputation assassination”.<o:p></o:p>

Karahan, with nearly a decade of experience at the Federal Reserve Bank of New York and a background as an adjunct professor at prestigious institutions such as Columbia University and New York University, brings a wealth of knowledge to his new role. <o:p></o:p>

His previous stint at Amazon as a principal economist in 2022 adds a practical dimension to his academic expertise.<o:p></o:p>

&nbsp;Finance Minister Mehmet Simsek expressed optimism about Karahan's appointment, describing him as an "excellent fit" due to his extensive experience, particularly with the Federal Reserve Bank of New York.<o:p></o:p>

Simsek further highlighted the commitment to support the disinflation process through fiscal discipline and structural reforms.<o:p></o:p>

In his inaugural statement, Governor Karahan emphasised that the primary focus would be on achieving price stability. He expressed confidence in his team's ability to navigate the challenges, stating, "We will continue efforts to ensure disinflation, relying on a strong team." <o:p></o:p>

The central bank's decision to appoint one of its deputy governors, Karahan, to the top position aligns with the Turkish finance ministry's claim that the current central bank strategy enjoys full support from President Tayyip Erdogan. <o:p></o:p>

Goldman Sachs noted in a client memo that the appointment should allay concerns over potential political instability, asserting, "We view the appointment as positive as it should allay any concerns over a near-term loss of political support for the Bank."<o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

In a change of leadership, Fatih Karahan took the helm as the new governor of Turkey's central bank, replacing Hafize Gaye Erkan. Karahan, a 42-year-old economist with a University of Pennsylvania economics PhD, emphasised his commitment to a stringent monetary policy aimed at curbing inflation.

In a change of leadership, Fatih Karahan took the helm as the new governor of Turkey's central bank, replacing Hafize Gaye Erkan. Karahan, a 42-year-old economist with a University of Pennsylvania economics PhD, emphasised his commitment to a stringent monetary policy aimed at curbing inflation. "We will be watchful of inflation expectations and pricing behavior. We stand ready to act in case of any deterioration in the inflation outlook," Reuters quoted Karahan as saying. This move comes on the heels of Erkan's resignation, who cited the need to protect her family amid what she described as a "reputation assassination”. Karahan, with nearly a decade of experience at the Federal Reserve Bank of New York and a background as an adjunct professor at prestigious institutions such as Columbia University and New York University, brings a wealth of knowledge to his new role. His previous stint at Amazon as a principal economist in 2022 adds a practical dimension to his academic expertise. Finance Minister Mehmet Simsek expressed optimism about Karahan's appointment, describing him as an "excellent fit" due to his extensive experience, particularly with the Federal Reserve Bank of New York. Simsek further highlighted the commitment to support the disinflation process through fiscal discipline and structural reforms. In his inaugural statement, Governor Karahan emphasised that the primary focus would be on achieving price stability. He expressed confidence in his team's ability to navigate the challenges, stating, "We will continue efforts to ensure disinflation, relying on a strong team." The central bank's decision to appoint one of its deputy governors, Karahan, to the top position aligns with the Turkish finance ministry's claim that the current central bank strategy enjoys full support from President Tayyip Erdogan. Goldman Sachs noted in a client memo that the appointment should allay concerns over potential political instability, asserting, "We view the appointment as positive as it should allay any concerns over a near-term loss of political support for the Bank." (With inputs from Reuters)

Turkey's new central bank chief vows to maintain tight monetary policy amid inflation concerns

Asian stock markets surged following the Federal Reserve's recent decision, mirroring the upward trajectory of U.S. equities and bonds. The Federal Reserve's indication that it might conclude its policy tightening cycle was met with optimism by investors.

Japanese, Hong Kong, and South Korean stocks all opened with gains, while mainland Chinese stocks started the day with a relatively stable performance.

On Wall Street, the S&amp;P 500 witnessed a robust rally, climbing by over 1%, positioning the leading U.S. benchmark for its most impressive weekly performance since March. Notably, the tech-heavy Nasdaq 100 outperformed other U.S. indices.

The decline in Treasury yields had a dampening effect on the U.S. dollar, causing it to weaken against major currencies and providing support for the Japanese yen, which continued to strengthen during early trading, extending its gains from the previous day.

Federal Reserve Chair Jerome Powell, in the central bank's decision, left the possibility of future interest rate hikes open. However, he also highlighted the considerable tightening of financial conditions in recent months, partly due to higher long-term bond yields and other contributing factors.

In the energy market, U.S. crude oil prices surged by over 1% at the market open, partly due to supply concerns arising from the ongoing conflict in Israel and Gaza. The Federal Reserve's decision to maintain its current stance also contributed to the oil price rally since any substantial increase in interest rates could potentially slow down the global economy, affecting oil demand.

The Federal Reserve's unchanged stance had a positive impact on non-yielding assets like gold. This is because higher interest rates would diminish the opportunity cost of holding precious metals.

The cryptocurrency markets also responded positively to the Federal Reserve's decision. Following Jerome Powell's public address, Bitcoin witnessed a notable increase of over 3%. Major alternative cryptocurrencies, including Ethereum and Ripple, followed suit with gains that mirrored Bitcoin's performance.&nbsp;

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Asian stock markets surged following the Federal Reserve's recent decision, mirroring the upward trajectory of U.S. equities and bonds. The Federal Reserve's indication that it might conclude its policy tightening cycle was met with optimism by investors.

Asian stock markets surged following the Federal Reserve's recent decision, mirroring the upward trajectory of U.S. equities and bonds. The Federal Reserve's indication that it might conclude its policy tightening cycle was met with optimism by investors. Japanese, Hong Kong, and South Korean stocks all opened with gains, while mainland Chinese stocks started the day with a relatively stable performance. On Wall Street, the S&P 500 witnessed a robust rally, climbing by over 1%, positioning the leading U.S. benchmark for its most impressive weekly performance since March. Notably, the tech-heavy Nasdaq 100 outperformed other U.S. indices. The decline in Treasury yields had a dampening effect on the U.S. dollar, causing it to weaken against major currencies and providing support for the Japanese yen, which continued to strengthen during early trading, extending its gains from the previous day. Federal Reserve Chair Jerome Powell, in the central bank's decision, left the possibility of future interest rate hikes open. However, he also highlighted the considerable tightening of financial conditions in recent months, partly due to higher long-term bond yields and other contributing factors. In the energy market, U.S. crude oil prices surged by over 1% at the market open, partly due to supply concerns arising from the ongoing conflict in Israel and Gaza. The Federal Reserve's decision to maintain its current stance also contributed to the oil price rally since any substantial increase in interest rates could potentially slow down the global economy, affecting oil demand. The Federal Reserve's unchanged stance had a positive impact on non-yielding assets like gold. This is because higher interest rates would diminish the opportunity cost of holding precious metals. The cryptocurrency markets also responded positively to the Federal Reserve's decision. Following Jerome Powell's public address, Bitcoin witnessed a notable increase of over 3%. Major alternative cryptocurrencies, including Ethereum and Ripple, followed suit with gains that mirrored Bitcoin's performance. WATCH WION LIVE HERE

Global Markets Roundup | Asian markets rally after U.S. Fed's monetary policy decision

Asian stock markets kicked off the day with a positive note, opening in the green, while U.S. stocks faced losses for the third consecutive month. Oil prices made a marginal climb, and the price of gold dropped below $2,000 per ounce. These market dynamics set the stage for a day filled with economic activity and events to watch closely.

One of the key cues to keep an eye on today is the U.S. Federal Reserve's policy decision. The Federal Reserve is concluding its two-day monetary policy meeting, and the prevailing expectation in the markets is that the central bank will maintain the status quo by keeping interest rates unchanged.

In the Asian markets, Japan's Nikkei 225 Index opened with a significant rise of over 2 per cent, indicating strong early trading activity. South Korea's KOSPI also opened nearly 1 per cent higher. In contrast, Hong Kong and mainland Chinese stocks opened relatively flat.

In the U.S., the situation is a bit different. U.S. stocks closed higher on Tuesday, regaining some lost ground after a challenging month. However, it's important to note that U.S. stocks posted losses for the third straight month, which is a concerning trend in the financial markets.

The oil market saw a slight uptick in prices during early Asian trading hours. This increase comes as the market closely monitors the latest developments in the Israel-Hamas conflict. It's essential to remember that the trajectory of interest rates plays a critical role in the oil market. Interest rate hikes, aimed at curbing inflation, have the potential to slow down economic growth and reduce oil demand. Conversely, rate cuts, which are intended to stimulate spending, could increase oil consumption.

Meanwhile, the price of gold witnessed a decline, falling below the $2,000 per ounce mark. This drop followed a significant rally of over 8 per cent in the previous week. The primary reason for this decline is the anticipation of higher interest rates for a more extended period, which is impacting the demand for non-yielding assets like gold. Additionally, the strengthening U.S. dollar is contributing to the downward pressure on gold prices.

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Asian stock markets kicked off the day with a positive note, opening in the green, while U.S. stocks faced losses for the third consecutive month. Oil prices made a marginal climb, and the price of gold dropped below $2,000 per ounce.

Asian stock markets kicked off the day with a positive note, opening in the green, while U.S. stocks faced losses for the third consecutive month. Oil prices made a marginal climb, and the price of gold dropped below $2,000 per ounce. These market dynamics set the stage for a day filled with economic activity and events to watch closely. One of the key cues to keep an eye on today is the U.S. Federal Reserve's policy decision. The Federal Reserve is concluding its two-day monetary policy meeting, and the prevailing expectation in the markets is that the central bank will maintain the status quo by keeping interest rates unchanged. In the Asian markets, Japan's Nikkei 225 Index opened with a significant rise of over 2 per cent, indicating strong early trading activity. South Korea's KOSPI also opened nearly 1 per cent higher. In contrast, Hong Kong and mainland Chinese stocks opened relatively flat. In the U.S., the situation is a bit different. U.S. stocks closed higher on Tuesday, regaining some lost ground after a challenging month. However, it's important to note that U.S. stocks posted losses for the third straight month, which is a concerning trend in the financial markets. The oil market saw a slight uptick in prices during early Asian trading hours. This increase comes as the market closely monitors the latest developments in the Israel-Hamas conflict. It's essential to remember that the trajectory of interest rates plays a critical role in the oil market. Interest rate hikes, aimed at curbing inflation, have the potential to slow down economic growth and reduce oil demand. Conversely, rate cuts, which are intended to stimulate spending, could increase oil consumption. Meanwhile, the price of gold witnessed a decline, falling below the $2,000 per ounce mark. This drop followed a significant rally of over 8 per cent in the previous week. The primary reason for this decline is the anticipation of higher interest rates for a more extended period, which is impacting the demand for non-yielding assets like gold. Additionally, the strengthening U.S. dollar is contributing to the downward pressure on gold prices. WATCH WION LIVE HERE

Global Markets Roundup | Markets await US Fed's monetary policy decision today

Reserve Bank of India&nbsp;Governor&nbsp;Shaktikanta Das&nbsp;said on Tuesday that the monetary policy must be forward-looking, adding that using a policy approach that only looks in the rear-view mirror can result in crises.

Das used the comparison of driving a car on a road with potential ditches and speed bumps to explain how monetary policy is conducted.

“Driver needs to see ahead and regulate the speed of the car. If driver reacts suddenly to a speed bump, he can cause accident,” Moneycontrol quoted Das, who was delivering the&nbsp;Delhi School of Economics Diamond Jubilee Distinguished Lecture.

Over the past few years, the RBI has fought a protracted war against high inflation. In order to combat inflation, the RBI increased the repo rate, the rate at which the central bank provides short-term cash to banks, by 250 basis points since May 2022.

The MPC (Monetary Policy Committee) is required to maintain retail inflation at the target rate of four per cent within a tolerance range of two to six per cent.

Although it has been slowing this year, inflation has not yet displayed a consistent pattern of lowering.&nbsp;&nbsp;In July, a sharp rise in vegetable prices caused India’s headline retail inflation rate to soar over the top limit of the RBI’s 2 to 6 per cent tolerance range and reach a 15-month high of 7.44 per cent.

In the near future, India’s inflation is likely to stay high, but government actions will stop it from increasing further, according to S&amp;P Global Ratings Economist (Asia Pacific) Vishrut Rana on Tuesday.

Das stated that the MPC must monitor price stability and take appropriate action, adding that the supply-side policies implemented by the fiscal authorities are of utmost significance.

“It is necessary to watch price stability and act appropriately. We are now firmly focused on 4 per cent target,” Moneycontrol quoted Das as saying.

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Reserve Bank of India Governor Shaktikanta Das said on Tuesday that the monetary policy must be forward-looking, adding that using a policy approach that only looks in the rear-view mirror can result in crises.

Reserve Bank of India Governor Shaktikanta Das said on Tuesday that the monetary policy must be forward-looking, adding that using a policy approach that only looks in the rear-view mirror can result in crises. Das used the comparison of driving a car on a road with potential ditches and speed bumps to explain how monetary policy is conducted. “Driver needs to see ahead and regulate the speed of the car. If driver reacts suddenly to a speed bump, he can cause accident,” Moneycontrol quoted Das, who was delivering the Delhi School of Economics Diamond Jubilee Distinguished Lecture. Over the past few years, the RBI has fought a protracted war against high inflation. In order to combat inflation, the RBI increased the repo rate, the rate at which the central bank provides short-term cash to banks, by 250 basis points since May 2022. The MPC (Monetary Policy Committee) is required to maintain retail inflation at the target rate of four per cent within a tolerance range of two to six per cent. Although it has been slowing this year, inflation has not yet displayed a consistent pattern of lowering. In July, a sharp rise in vegetable prices caused India’s headline retail inflation rate to soar over the top limit of the RBI’s 2 to 6 per cent tolerance range and reach a 15-month high of 7.44 per cent. In the near future, India’s inflation is likely to stay high, but government actions will stop it from increasing further, according to S&P Global Ratings Economist (Asia Pacific) Vishrut Rana on Tuesday. Das stated that the MPC must monitor price stability and take appropriate action, adding that the supply-side policies implemented by the fiscal authorities are of utmost significance. “It is necessary to watch price stability and act appropriately. We are now firmly focused on 4 per cent target,” Moneycontrol quoted Das as saying. WATCH WION LIVE HERE

Monetary policy needs to look at the future: RBI Governer Shaktikanta Das 

With retail inflation rising again in July-August due to a surge in vegetable prices, the Reserve Bank of India's rate-setting council has emphasised on the importance of closely monitoring the situation given the danger of El Nino and uneven rainfall.&nbsp;

The Monetary Policy Council (MPC) observed in its assessment that monsoon and kharif sowing progress improved significantly in July, but the impact of the uneven rainfall distribution required close monitoring.

In July, retail inflation in India reached a 15-month high of 7.44 percent. On the other hand, Food inflation, which accounts for over half of total consumer price inflation, accelerated to 11.51 percent, the highest level since April 2020.

"While the vegetable price shocks are expected to be quickly corrected with the arrival of fresh crops, there are risks to the food and overall inflation outlook from El Nino conditions, volatile global food prices, and skewed monsoon distribution—all of which warrant close monitoring," media reports quoted&nbsp;RBI Governor Shaktikanta Das as saying at a recent Monetary Policy Committee meeting.

The MPC, which consists of three members from the central bank and a comparable number of external members, convened on August 8–10 and unanimously decided to keep the benchmark repurchase rate (repo) at 6.50 percent.

The RBI boosted its inflation prediction for the current fiscal year ending March 2024 to 5.4 percent from 5.1 percent before, citing food price pressures. Inflation was 6.2 percent in the July–September quarter, much higher than the 5.2 percent predicted before.

"Given the likely short-term nature of the vegetable price shocks, monetary policy can look through the first-round impact of fleeting shocks on headline inflation," Das explained.&nbsp;

Furthermore, the destabilisation of the international inflation environment as a result of geopolitical developments was recognized by RBI Deputy Governor Michael Patra.&nbsp; 
&nbsp;

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With retail inflation rising again in July-August due to a surge in vegetable prices, the Reserve Bank of India's rate-setting council has emphasised on the importance of closely monitoring the situation given the danger of El Nino and uneven rainfall.

With retail inflation rising again in July-August due to a surge in vegetable prices, the Reserve Bank of India's rate-setting council has emphasised on the importance of closely monitoring the situation given the danger of El Nino and uneven rainfall. The Monetary Policy Council (MPC) observed in its assessment that monsoon and kharif sowing progress improved significantly in July, but the impact of the uneven rainfall distribution required close monitoring. In July, retail inflation in India reached a 15-month high of 7.44 percent. On the other hand, Food inflation, which accounts for over half of total consumer price inflation, accelerated to 11.51 percent, the highest level since April 2020. "While the vegetable price shocks are expected to be quickly corrected with the arrival of fresh crops, there are risks to the food and overall inflation outlook from El Nino conditions, volatile global food prices, and skewed monsoon distribution—all of which warrant close monitoring," media reports quoted RBI Governor Shaktikanta Das as saying at a recent Monetary Policy Committee meeting. The MPC, which consists of three members from the central bank and a comparable number of external members, convened on August 8–10 and unanimously decided to keep the benchmark repurchase rate (repo) at 6.50 percent. The RBI boosted its inflation prediction for the current fiscal year ending March 2024 to 5.4 percent from 5.1 percent before, citing food price pressures. Inflation was 6.2 percent in the July–September quarter, much higher than the 5.2 percent predicted before. "Given the likely short-term nature of the vegetable price shocks, monetary policy can look through the first-round impact of fleeting shocks on headline inflation," Das explained. Furthermore, the destabilisation of the international inflation environment as a result of geopolitical developments was recognized by RBI Deputy Governor Michael Patra. WATCH WION LIVE HERE

RBI MPC meeting minutes reveal resurfacing inflation concerns

Is it time for India to reevaluate its inflation and monetary policy trajectory? Are the markets and central bank underestimating&nbsp;the inflation risk, just like they did in 2021?

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Inflation has plagued India for decades, yet economists anticipate the recent surge in price pressures to be temporary. Retail inflation in India surged to a 15-month high due to soaring prices of vegetables and cereals.

Recently, RBI Governor Shaktikanta Das unveiled the Monetary Policy Committee's decision on interest rates, shedding light on additional choices the central bank has made amid the global economic uncertainty. As expected by experts,&nbsp;the RBI MPC kept the key policy rate -- repo rate --&nbsp;unchanged at 6.5 per cent.&nbsp;

Despite prevailing expectations, the Reserve Bank of India appears poised to maintain its current stance, with the likelihood of a rate cut emerging as the next move. A closer examination of India's latest inflation figures reveals notable insights into the factors driving these trends.

Headline inflation registered a surprising surge, reaching 7.44 percent in July compared to the previous year. This marked the highest reading since April 2022, surpassing the upper threshold of the RBI's inflation tolerance band of 2 percent to 6 percent for the first time in five months.

The sharp increase can be attributed to the recent uptick in food prices. However, core inflation, which excludes volatile components like vegetables, experienced only a slight uptick. This aspect has contributed to economists' confidence in viewing the current inflationary pressures as transitory.

While the broader consensus anticipates that the&nbsp;RBI will&nbsp;take&nbsp;proactive measures, indications point to the central bank maintaining steady rates for the time being. Yet, a minority of economists emphasize the need to remain vigilant in monitoring potential price pressures.

Sakshi Gupta, the Principal Economist at HDFC Bank, commented on the retail inflation, "While this upward movement might be temporary, it's crucial to reassess the inflation trajectory, particularly if food costs begin to influence both expectations and core inflation."

Amidst these differing perspectives regarding the course of inflation, the Reserve Bank of India (RBI), on its part, is anticipated to maintain its current interest rates. The prevailing consensus strongly indicates that the next plausible step will be a reduction in interest rates.

Domestic rating agency Icra said on Monday that it expects the Reserve Bank to decrease interest rates only in the July-September quarter of next year. According to the agency, the total reduction in the cycle will be a "shallow" (0.50-0.75 percent).

The RBI can raise interest rates only if headline inflation remains over six per cent for two consecutive quarters, according to the agency.

Is it time for India to reevaluate its inflation and monetary policy trajectory? Are the markets and central bank underestimating the inflation risk, just like they did in 2021?

Is it time for India to reevaluate its inflation and monetary policy trajectory? Are the markets and central bank underestimating the inflation risk, just like they did in 2021? Inflation has plagued India for decades, yet economists anticipate the recent surge in price pressures to be temporary. Retail inflation in India surged to a 15-month high due to soaring prices of vegetables and cereals. Recently, RBI Governor Shaktikanta Das unveiled the Monetary Policy Committee's decision on interest rates, shedding light on additional choices the central bank has made amid the global economic uncertainty. As expected by experts, the RBI MPC kept the key policy rate -- repo rate -- unchanged at 6.5 per cent. Despite prevailing expectations, the Reserve Bank of India appears poised to maintain its current stance, with the likelihood of a rate cut emerging as the next move. A closer examination of India's latest inflation figures reveals notable insights into the factors driving these trends. Headline inflation registered a surprising surge, reaching 7.44 percent in July compared to the previous year. This marked the highest reading since April 2022, surpassing the upper threshold of the RBI's inflation tolerance band of 2 percent to 6 percent for the first time in five months. The sharp increase can be attributed to the recent uptick in food prices. However, core inflation, which excludes volatile components like vegetables, experienced only a slight uptick. This aspect has contributed to economists' confidence in viewing the current inflationary pressures as transitory. While the broader consensus anticipates that the RBI will take proactive measures, indications point to the central bank maintaining steady rates for the time being. Yet, a minority of economists emphasize the need to remain vigilant in monitoring potential price pressures. Sakshi Gupta, the Principal Economist at HDFC Bank, commented on the retail inflation, "While this upward movement might be temporary, it's crucial to reassess the inflation trajectory, particularly if food costs begin to influence both expectations and core inflation." Amidst these differing perspectives regarding the course of inflation, the Reserve Bank of India (RBI), on its part, is anticipated to maintain its current interest rates. The prevailing consensus strongly indicates that the next plausible step will be a reduction in interest rates. Domestic rating agency Icra said on Monday that it expects the Reserve Bank to decrease interest rates only in the July-September quarter of next year. According to the agency, the total reduction in the cycle will be a "shallow" (0.50-0.75 percent). The RBI can raise interest rates only if headline inflation remains over six per cent for two consecutive quarters, according to the agency.

India's inflation outlook: Does the central bank need to re-evaluate its monetary policy?

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years.&nbsp;Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.75 per cent, the highest level since 2000-01.

Aggressive rate hikes are not limited to the United States or the euro zone. Sixteen of the the G20 countries - the biggest economies in the world - have raised rates over the past year. The only exceptions to this trend are Japan and China - the world's third-and second-largest economies respectively.

China has been cutting rates intermittently in order to boost its flagging economy. In June this year, its central bank cut a key medium-term lending rate from 2.75 per cent to 2.65 per cent. Japan, on the other hand, has been following an unconventional monetary policy, wherein the interest rate is near-zero.

But one country took the cake when it came to its monetary policy: Turkiye. The country took a contrarian approach and began cutting rates from the end of 2021. This however led to the Turkish Lira losing&nbsp;about 60 per cent of its value and burdening the government with high debt.

But whether countries hiked or cut interest rates, there has been one common factor influencing these decisions - high inflation.

'Black swan' events and inflation

When author Nassim Nicholas Taleb coined the term 'Black Swan' in his book of the same name, he may not have imagined the enormous impact of the word on the global economy. A 'black swan' event is an unexpected and random incident which has a long-lasting impact on the economy.

The Covid-induced global lockdowns and the ongoing Ukraine war are clearly 'black swan' events. The twin events, which hit the world within a gap of two years, continue to disrupt the global supply chains and commodities markets, leading to a slowdown in the global economy and massive inflation worldwide.

Global inflation continues to be above the pre-pandemic (2017-19) levels of 3.5 per cent. According to the International Monetary Fund's forecast, the global headline inflation -- this includes prices of food and energy -- stood at 8.7 per cent last year. It fell to 6.8 per cent in 2023 and is expected to further decline to 5.2 per cent in 2024.

The inflation monster has eaten into the pockets of people living in advanced as well as poorer countries. To put inflation&nbsp;numbers in&nbsp;perspective: Venezuela had an inflation rate of 400 per cent as per a 2023 IMF estimate, while inflation in the UK is expected to be around seven per cent this year. The UK's inflation rate is the highest among the advanced countries in 2023. &nbsp;

Decoding central bank's interest rate logic

Major central banks across the world have been raising their interest rates aggressively to combat surging inflation. In 21st Century economics, this is commonly called the 'Taylor rule'. Named after the US new-Keynesian economist John B Taylor, the rule entails a higher interest rate when the inflation rate is higher and vice versa.

The conventional argument is that a high interest rate makes it costlier for people to borrow money. With borrowing getting expensive, consumers are forced to spend less. When spending declines, there is a fall in demand. It is therefore postulated that weakening demand will eventually reduce the price of goods.

This is precisely the logic behind global central banks rising the interest rates, when the inflation rate is not in the target range. Inflation targetting is a major monetary policy tool used by central banks to keep inflation within a tolerable range. This tolerance band varies from country to country. In the US, the inflation target is at 2 per cent. In India, the target is 4 per cent, with 2 per cent being the lower range and six per cent being the upper limit.

The conventional monetary strategy has helped countries bring down inflation, though not to the levels they believe are ideal.

Negative impact of rate hikes

High interest rates however have an unintended negative pull on the economy. The ongoing economic downturn around the world is an example of central banks prioritising lower inflation over healthy economic growth.

To be fair, it is tough to be a central banker in 2023. Two 'black swan' events have threatened the global economy. Some countries are on the brink of bankruptcy, while some are facing the heat of rising cost of living. So, controlling inflation has become the priority.

But eventually, no country can truly come out of economic misery by just adjusting the monetary policy. That would mean prolonged stress on the growth prospects of a country.

Higher interest rates lead to a domino effect, with severe long-term consequences for economic growth. Higher interest rates lead to a fall in consumer demand as people have less income to spend. This in turn impacts industrial output as lower demand means less production. Eventually, lower industrial performance forces companies to lay off employees, leading to a rise in unemployment.

The ongoing global economic downturn encapsulates the domino effect pretty well. Many now argue that the looming fear of recession in several advanced countries is a result of central banks continuing with unabated rate hikes.

Currently, central bankers face a two-fold challenge. They need to deliver on economic growth to avoid a recession and also tame high inflation. It will be a tough balancing act. In monetary policy, that's called 'soft landing' - a situation where central banks will raise rates enough to fight inflation but without causing a severe economic downturn.

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years. Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years. Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.75 per cent, the highest level since 2000-01. Aggressive rate hikes are not limited to the United States or the euro zone. Sixteen of the the G20 countries - the biggest economies in the world - have raised rates over the past year. The only exceptions to this trend are Japan and China - the world's third-and second-largest economies respectively. China has been cutting rates intermittently in order to boost its flagging economy. In June this year, its central bank cut a key medium-term lending rate from 2.75 per cent to 2.65 per cent. Japan, on the other hand, has been following an unconventional monetary policy, wherein the interest rate is near-zero. But one country took the cake when it came to its monetary policy: Turkiye. The country took a contrarian approach and began cutting rates from the end of 2021. This however led to the Turkish Lira losing about 60 per cent of its value and burdening the government with high debt. But whether countries hiked or cut interest rates, there has been one common factor influencing these decisions - high inflation. 'Black swan' events and inflation When author Nassim Nicholas Taleb coined the term 'Black Swan' in his book of the same name, he may not have imagined the enormous impact of the word on the global economy. A 'black swan' event is an unexpected and random incident which has a long-lasting impact on the economy. The Covid-induced global lockdowns and the ongoing Ukraine war are clearly 'black swan' events. The twin events, which hit the world within a gap of two years, continue to disrupt the global supply chains and commodities markets, leading to a slowdown in the global economy and massive inflation worldwide. Global inflation continues to be above the pre-pandemic (2017-19) levels of 3.5 per cent. According to the International Monetary Fund's forecast, the global headline inflation -- this includes prices of food and energy -- stood at 8.7 per cent last year. It fell to 6.8 per cent in 2023 and is expected to further decline to 5.2 per cent in 2024. The inflation monster has eaten into the pockets of people living in advanced as well as poorer countries. To put inflation numbers in perspective: Venezuela had an inflation rate of 400 per cent as per a 2023 IMF estimate, while inflation in the UK is expected to be around seven per cent this year. The UK's inflation rate is the highest among the advanced countries in 2023. Decoding central bank's interest rate logic Major central banks across the world have been raising their interest rates aggressively to combat surging inflation. In 21st Century economics, this is commonly called the 'Taylor rule'. Named after the US new-Keynesian economist John B Taylor, the rule entails a higher interest rate when the inflation rate is higher and vice versa. The conventional argument is that a high interest rate makes it costlier for people to borrow money. With borrowing getting expensive, consumers are forced to spend less. When spending declines, there is a fall in demand. It is therefore postulated that weakening demand will eventually reduce the price of goods. This is precisely the logic behind global central banks rising the interest rates, when the inflation rate is not in the target range. Inflation targetting is a major monetary policy tool used by central banks to keep inflation within a tolerable range. This tolerance band varies from country to country. In the US, the inflation target is at 2 per cent. In India, the target is 4 per cent, with 2 per cent being the lower range and six per cent being the upper limit. The conventional monetary strategy has helped countries bring down inflation, though not to the levels they believe are ideal. Negative impact of rate hikes High interest rates however have an unintended negative pull on the economy. The ongoing economic downturn around the world is an example of central banks prioritising lower inflation over healthy economic growth. To be fair, it is tough to be a central banker in 2023. Two 'black swan' events have threatened the global economy. Some countries are on the brink of bankruptcy, while some are facing the heat of rising cost of living. So, controlling inflation has become the priority. But eventually, no country can truly come out of economic misery by just adjusting the monetary policy. That would mean prolonged stress on the growth prospects of a country. Higher interest rates lead to a domino effect, with severe long-term consequences for economic growth. Higher interest rates lead to a fall in consumer demand as people have less income to spend. This in turn impacts industrial output as lower demand means less production. Eventually, lower industrial performance forces companies to lay off employees, leading to a rise in unemployment. The ongoing global economic downturn encapsulates the domino effect pretty well. Many now argue that the looming fear of recession in several advanced countries is a result of central banks continuing with unabated rate hikes. Currently, central bankers face a two-fold challenge. They need to deliver on economic growth to avoid a recession and also tame high inflation. It will be a tough balancing act. In monetary policy, that's called 'soft landing' - a situation where central banks will raise rates enough to fight inflation but without causing a severe economic downturn.

Decoded: Why central banks hike interest rates to tame inflation 

RBI hikes repo rate: RBI Governor Shaktikanta Das released the Monetary Policy statement on Wednesday, February 8, 2023. The Monetary Policy 2023 includes an increase in the repo rate by 25 basis points (bps) which was widely anticipated. In the December review of the Monetary Policy, the Reserve Bank of India raised the prime benchmark interest rate by 35 bps. The RBI has advanced the short-term lending rate by 250 bps since May 2023. The central bank said the decision was to control inflation. The RBI governor said the central bank will keep a check on the constantly changing economic situation.&nbsp;

According to the Monetary Policy 2023, the RBI has increased the repo rate to 6.25 per cent with immediate effect. The Reserve Bank of India has increased the repo rate for the sixth time. The repo rate hike decision will directly affect one's monthly EMIs as banks would increase their interest rates on retail loans.&nbsp;

Keeping in mind the impact of the repo rate hike on citizens, we have compiled a list of significant terms of RBI's monetary policy review meet.&nbsp;

<h2>What is monetary policy?</h2>

The RBI's monetary policy is the compilation of financial measures that safeguard and promote India's economic growth. The primary goal of RBI's monetary policy is retaining price stability without losing the growth objective. The monetary policy regulates the overall money supply to commercial banks. It has a direct impact on individual users and companies.&nbsp;

<h2>What is repo rate?</h2>

When commercial banks loan by selling their securities to the Reserve Bank of India, the RBI charges them an interest rate. This interest rate is called the repo rate in the monetary policy. Repo rate hike indirectly affects the interest rates of car loans or home loans. Currently, the repo rate per the Monetary Policy 2023 is 6.25 per cent.&nbsp;

<h2> 
What is reverse repo rate?</h2>

The opposite of the repo rate is reverse repo rate. The RBI pays interest to commercial banks when they hold surplus cash reserves. The RBI uses a reverse repo rate to maintain the cash flow in the economy. The reverse repo rate is 3.35 per cent per Monetary Policy 2023.&nbsp;

<h2>What happens when RBI hikes repo rate?</h2>

When RBI hikes the repo rate, the cost of borrowing increases. When of cost of borrowing increases, all types of loans become expensive. Moreover, a repo rate hike directly impacts debt mutual funds. Thus, a repo rate hike could stifle investors' confidence in the stock market.&nbsp;

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RBI hikes repo rate: RBI Governor Shaktikanta Das released the Monetary Policy statement on Wednesday, February 8, 2023. The Monetary Policy 2023 includes an increase in the repo rate by 25 basis points (bps) which was widely anticipated.

RBI hikes repo rate: RBI Governor Shaktikanta Das released the Monetary Policy statement on Wednesday, February 8, 2023. The Monetary Policy 2023 includes an increase in the repo rate by 25 basis points (bps) which was widely anticipated. In the December review of the Monetary Policy, the Reserve Bank of India raised the prime benchmark interest rate by 35 bps. The RBI has advanced the short-term lending rate by 250 bps since May 2023. The central bank said the decision was to control inflation. The RBI governor said the central bank will keep a check on the constantly changing economic situation. According to the Monetary Policy 2023, the RBI has increased the repo rate to 6.25 per cent with immediate effect. The Reserve Bank of India has increased the repo rate for the sixth time. The repo rate hike decision will directly affect one's monthly EMIs as banks would increase their interest rates on retail loans. Keeping in mind the impact of the repo rate hike on citizens, we have compiled a list of significant terms of RBI's monetary policy review meet. What is monetary policy? The RBI's monetary policy is the compilation of financial measures that safeguard and promote India's economic growth. The primary goal of RBI's monetary policy is retaining price stability without losing the growth objective. The monetary policy regulates the overall money supply to commercial banks. It has a direct impact on individual users and companies. What is repo rate? When commercial banks loan by selling their securities to the Reserve Bank of India, the RBI charges them an interest rate. This interest rate is called the repo rate in the monetary policy. Repo rate hike indirectly affects the interest rates of car loans or home loans. Currently, the repo rate per the Monetary Policy 2023 is 6.25 per cent. What is reverse repo rate? The opposite of the repo rate is reverse repo rate. The RBI pays interest to commercial banks when they hold surplus cash reserves. The RBI uses a reverse repo rate to maintain the cash flow in the economy. The reverse repo rate is 3.35 per cent per Monetary Policy 2023. What happens when RBI hikes repo rate? When RBI hikes the repo rate, the cost of borrowing increases. When of cost of borrowing increases, all types of loans become expensive. Moreover, a repo rate hike directly impacts debt mutual funds. Thus, a repo rate hike could stifle investors' confidence in the stock market. ALSO READ | Rahul Gandhi says Adani gets contracts wherever prime minister visits, BJP labels allegations 'baseless'

RBI hikes repo rate by 25 bps in Monetary Policy 2023: What is repo rate, reverse repo rate & monetary policy?

Japan's central bank left its ultra-easy monetary policy unchanged, a move that sent the yen plunging, despite heavy speculation it could again tweak a key lever.

Bank of Japan sticks to easy policy, defies market speculation

Global recession can be avoided if governments' fiscal policies were consistent with monetary policy tightening, the International Monetary Fund's managing director said on Monday.

World Business Watch: IMF chief Georgieva says global recession avoidable

The world economies may fall into a global recession next year amid aggressive monetary policy tightening by central banks to tame inflation, the World Bank said.

World Business Watch: World Bank sees rising risk of global recession in 2023 amid rate hikes

The Reserve Bank of India`s monetary policy committee (MPC) stuck to its accommodative policy stance to help the economy recover from the pits of the pandemic, keeping the key lending rate at record lows on Thursday.

As expected, the MPC held the lending rate, or the repo rate, at 4 per cent. The RBI, however, surprised some economists by also leaving the reverse repo rate, the key borrowing rate, unchanged at 3.35 per cent.

The MPC voted unanimously to maintain the status quo on the repo rate and by a majority of 5-1 to retain the accommodative policy stance.

Continued policy support was warranted for a durable and broadbased recovery, RBI governor Shaktikanta Das said, noting an improving inflation outlook, prospects for economic growth and uncertainties posed by the fast-spreading Omicron variant of COVID-19, and the global economy.

"Private consumption, the mainstay of domestic demand, continues to trail its pre-pandemic level. The persistent increase in international commodity prices, surge in volatility of global financial markets and global supply bottlenecks can exacerbate risks to the outlook," he said in his policy address.

"Overall, there is some loss of the momentum of near-term growth while global factors are turning adverse. Looking ahead, domestic growth drivers are gradually improving."

India`s 10-year benchmark bond yield fell 8 basis points to 6.72 per cent by 0610 GMT, in reaction to the policy, while the rupee weakened just slightly to 74.91 per dollar.

The NSE Nifty 50 index rose 0.84 per cent to 17,610.20, while the S&amp;P BSE Sensex was up 0.83 per cent at 58,953.65.

Retail inflation accelerated to a five-month high of 5.59 per cent&nbsp;in December from a year earlier, while wholesale price-based inflation, a proxy for producer prices, eased marginally to 13.56 per cent, but remained in double-digits for nine straight months.

Rising oil prices pose a major upside risk to inflation but it should peak in the current quarter and then moderate closer towards the 4 per cent&nbsp;target in H2 of 2022/23 providing room for monetary policy to stay accommodative, Das said.

Real GDP growth is projected at 7.8 per cent in 2022/23 compared to expected growth of 9.2 per cent this year, he added.

"The somewhat comfortable inflation trajectory provides RBI space to withdraw monetary support only gradually and reduces the need of any sudden tightening actions," said Sakshi Gupta, senior economist at HDFC bank in Gurugram.

"We expect the RBI to support growth and raise the repo rate only by the August policy once there are greater signs of a more even recovery."

The central bank has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the coronavirus pandemic and tough containment measures. The rate is now 250 bps below its level at the beginning of 2019, when the easing cycle began. 
&nbsp;

The Reserve Bank of India`s monetary policy committee (MPC) stuck to its accommodative policy stance to help the economy recover from the pits of the pandemic, keeping the key lending rate at record lows on Thursday.

The Reserve Bank of India`s monetary policy committee (MPC) stuck to its accommodative policy stance to help the economy recover from the pits of the pandemic, keeping the key lending rate at record lows on Thursday. As expected, the MPC held the lending rate, or the repo rate, at 4 per cent. The RBI, however, surprised some economists by also leaving the reverse repo rate, the key borrowing rate, unchanged at 3.35 per cent. The MPC voted unanimously to maintain the status quo on the repo rate and by a majority of 5-1 to retain the accommodative policy stance. Continued policy support was warranted for a durable and broadbased recovery, RBI governor Shaktikanta Das said, noting an improving inflation outlook, prospects for economic growth and uncertainties posed by the fast-spreading Omicron variant of COVID-19, and the global economy. "Private consumption, the mainstay of domestic demand, continues to trail its pre-pandemic level. The persistent increase in international commodity prices, surge in volatility of global financial markets and global supply bottlenecks can exacerbate risks to the outlook," he said in his policy address. "Overall, there is some loss of the momentum of near-term growth while global factors are turning adverse. Looking ahead, domestic growth drivers are gradually improving." India`s 10-year benchmark bond yield fell 8 basis points to 6.72 per cent by 0610 GMT, in reaction to the policy, while the rupee weakened just slightly to 74.91 per dollar. The NSE Nifty 50 index rose 0.84 per cent to 17,610.20, while the S&P BSE Sensex was up 0.83 per cent at 58,953.65. Retail inflation accelerated to a five-month high of 5.59 per cent in December from a year earlier, while wholesale price-based inflation, a proxy for producer prices, eased marginally to 13.56 per cent, but remained in double-digits for nine straight months. Rising oil prices pose a major upside risk to inflation but it should peak in the current quarter and then moderate closer towards the 4 per cent target in H2 of 2022/23 providing room for monetary policy to stay accommodative, Das said. Real GDP growth is projected at 7.8 per cent in 2022/23 compared to expected growth of 9.2 per cent this year, he added. "The somewhat comfortable inflation trajectory provides RBI space to withdraw monetary support only gradually and reduces the need of any sudden tightening actions," said Sakshi Gupta, senior economist at HDFC bank in Gurugram. "We expect the RBI to support growth and raise the repo rate only by the August policy once there are greater signs of a more even recovery." The central bank has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the coronavirus pandemic and tough containment measures. The rate is now 250 bps below its level at the beginning of 2019, when the easing cycle began.

Post-Budget, RBI keeps lending rate unchanged

With the government appointing three members on the Monetary Policy Committee (MPC), the Reserve Bank on Tuesday said the next meeting of the rate setting panel will be held for three days beginning October 7.

On September 28, the RBI had postponed the meeting of the MPC, which must have a quorum of four, as the appointment of independent members was delayed. "The next meeting of the Monetary Policy Committee (MPC) is scheduled during October 7 to October 9, 2020," it said in a statement.

The government has appointed three eminent economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as members of the MPC.

The new members replace Chetan Ghate, Pami Dua, and Ravindra Dholakia.

They were appointed on the panel for four years on September 29, 2016.

With the government appointing three members on the Monetary Policy Committee (MPC), the Reserve Bank on Tuesday said the next meeting of the rate setting panel will be held for three days beginning October 7.

With the government appointing three members on the Monetary Policy Committee (MPC), the Reserve Bank on Tuesday said the next meeting of the rate setting panel will be held for three days beginning October 7. On September 28, the RBI had postponed the meeting of the MPC, which must have a quorum of four, as the appointment of independent members was delayed. "The next meeting of the Monetary Policy Committee (MPC) is scheduled during October 7 to October 9, 2020," it said in a statement. The government has appointed three eminent economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as members of the MPC. The new members replace Chetan Ghate, Pami Dua, and Ravindra Dholakia. They were appointed on the panel for four years on September 29, 2016.

RBI's next monetary policy panel meeting from October 7-9

The European Parliament on Tuesday approved <a href="https://www.wionews.com/world/christine-lagarde-resigns-as-international-monetary-fund-chief-starting-race-for-her-successor-236536">outgoing IMF chief</a> Christine Lagarde as the next boss of the European Central Bank, which last week announced massive stimulus for the sluggish eurozone despite divisions among its governors.

<a href="https://www.wionews.com/world/lagarde-temporarily-steps-down-as-imf-chief-american-economist-david-lipton-named-interim-leader-232570">Lagarde</a>, who was absent for the vote, won backing from 394 MEPs, with 206 votings against and 49 abstaining in a secret ballot.

Some criticised her not turning up.

The parliament's green light is just a recommendation.

The final decision on her appointment is up to EU leaders in a mid-October summit.

She is expected to easily clinch that confirmation as the leaders put her forward for the ECB post back in July.

Lagarde, a former French economy minister and head of the International Monetary Fund for the past eight years, is expected to largely follow the course set by departing ECB president Mario Draghi.

Draghi was hailed seven years ago for saving the eurozone from the debilitating crisis by vowing "the ECB is ready to do whatever it takes".

But his decision last Thursday to have the ECB intervene again with quantitative easing (QE) from November and a cut to the interest paid on banks' deposits deeper into negative territory has ruffled the feathers of some EU states.

Germany and the Netherlands notably accused Draghi of going too far. Sources told AFP that around 10 of the 25 ECB governors were against relaunching QE.

Draghi had underlined three challenges facing the ECB and its goal of price stability: a slowing eurozone economy, looming trade protectionism and Brexit, and the bank's degrading economic forecasts.

He is to leave his job to Lagarde after hosting a last monetary policy meeting in October.

The European Parliament on Tuesday approved outgoing IMF chief Christine Lagarde as the next boss of the European Central Bank, which last week announced massive stimulus for the sluggish eurozone despite divisions among its governors.

The European Parliament on Tuesday approved outgoing IMF chief Christine Lagarde as the next boss of the European Central Bank, which last week announced massive stimulus for the sluggish eurozone despite divisions among its governors. Lagarde, who was absent for the vote, won backing from 394 MEPs, with 206 votings against and 49 abstaining in a secret ballot. Some criticised her not turning up. The parliament's green light is just a recommendation. The final decision on her appointment is up to EU leaders in a mid-October summit. She is expected to easily clinch that confirmation as the leaders put her forward for the ECB post back in July. Lagarde, a former French economy minister and head of the International Monetary Fund for the past eight years, is expected to largely follow the course set by departing ECB president Mario Draghi. Draghi was hailed seven years ago for saving the eurozone from the debilitating crisis by vowing "the ECB is ready to do whatever it takes". But his decision last Thursday to have the ECB intervene again with quantitative easing (QE) from November and a cut to the interest paid on banks' deposits deeper into negative territory has ruffled the feathers of some EU states. Germany and the Netherlands notably accused Draghi of going too far. Sources told AFP that around 10 of the 25 ECB governors were against relaunching QE. Draghi had underlined three challenges facing the ECB and its goal of price stability: a slowing eurozone economy, looming trade protectionism and Brexit, and the bank's degrading economic forecasts. He is to leave his job to Lagarde after hosting a last monetary policy meeting in October.

European Parliament approves Lagarde as next European Central Bank chief

There is a dramatic shift in Fed monetary policy overnight. The US Federal Reserve cuts interest rate for the first time since the great recession of 2008. Watch this video to know more.

Dramatic shift in Federal Reserve monetary policy

The BSE benchmark Sensex slipped below the key 35,000-mark in early trade today following losses in banking, power, realty and capital goods stocks.

Investors are cautious ahead of RBI's policy decision due&nbsp;tomorrow, brokers said.

The RBI's Monetary Policy Committee began its three-day meeting yesterday amid speculation that it may hike the key interest rate for the first time in over four years on account of firming inflation.

The 30-share index, which had lost 310.49 points in the previous two sessions, fell further by 101.70 points, or 0.29 per cent, to 34,910.19.

Sectoral indices led by power, banking, realty, capital goods and PSU declined up to 1.20 per cent.

The NSE Nifty also shed 33.55 points, or 0.32 per cent, to 10,594.95.

Shares of Powr Grid, Yes Bank, Bharti Airtel, Dr Reddy's, Infosys, Hero MotoCorp, L&T, HUL, Axis Bank, Bajaj Auto, HDFC Ltd and NTPC were trading in the negative zone with losses of up to 2.41 per cent.

Meanwhile, domestic institutional investors (DIIs) sold shares worth a net Rs 712.41 crore, while foreign portfolio investors (FPIs) bought shares worth Rs 2,354.03 crore yesterday, as per provisional data released by the stock exchanges.

Among other Asian markets, Hong Kong's Hang Seng fell 0.05 per cent, while Japan's Nikkei was up 0.12 per cent in early trade. Shanghai Composite Index also rose 0.02 per cent.

The US Dow Jones Industrial Average ended 0.72 per cent higher in yesterday's trade.

The RBI's Monetary Policy Committee began its three-day meeting yesterday amid speculation that it may hike the key interest rate for the first time in over four years on account of firming inflation

The BSE benchmark Sensex slipped below the key 35,000-mark in early trade today following losses in banking, power, realty and capital goods stocks. Investors are cautious ahead of RBI's policy decision due tomorrow, brokers said. The RBI's Monetary Policy Committee began its three-day meeting yesterday amid speculation that it may hike the key interest rate for the first time in over four years on account of firming inflation. The 30-share index, which had lost 310.49 points in the previous two sessions, fell further by 101.70 points, or 0.29 per cent, to 34,910.19. Sectoral indices led by power, banking, realty, capital goods and PSU declined up to 1.20 per cent. The NSE Nifty also shed 33.55 points, or 0.32 per cent, to 10,594.95. Shares of Powr Grid, Yes Bank, Bharti Airtel, Dr Reddy's, Infosys, Hero MotoCorp, L&T, HUL, Axis Bank, Bajaj Auto, HDFC Ltd and NTPC were trading in the negative zone with losses of up to 2.41 per cent. Meanwhile, domestic institutional investors (DIIs) sold shares worth a net Rs 712.41 crore, while foreign portfolio investors (FPIs) bought shares worth Rs 2,354.03 crore yesterday, as per provisional data released by the stock exchanges. Among other Asian markets, Hong Kong's Hang Seng fell 0.05 per cent, while Japan's Nikkei was up 0.12 per cent in early trade. Shanghai Composite Index also rose 0.02 per cent. The US Dow Jones Industrial Average ended 0.72 per cent higher in yesterday's trade.

Sensex down 102 points in cautious trade

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at its upcoming monetary policy review on April 5th. Despite downside surprises in the recent inflation readings, the Central Bank is likely to stay hawkish on account of two factors. One, there could be caution related to higher Minimum support prices (MSPs) that the government could offer to farmers in line with its budget ‘commitment’ and because of surging oil prices. Second, core inflation has become more broad-based and is markedly high for categories like services, said HDFC Bank treasury research paper today, adding that increase in components of salaries (like housing allowance) due for employees of the state governments could add to these pressures.&nbsp;

"We would also parse the commentary carefully for the RBI’s assessment of global risks such as an economically costly trade war between the US and its major trading partners, comments from the White House on dismantling or diluting trading arrangements like NAFTA, regulatory push-backs in industries like tech on the back of the recent controversy on data leaks, and finally geopolitical tensions with Russia and China (likely to flex their muscles) and the US taking a harder line on Iran and North Korea," said the paper, while adding that this may or may not directly lead to a change in monetary stance, but the central bank’s view on how prepared the domestic economy and markets are to face these risks become important. &nbsp;

The report said that change in the outlook of oil prices and emergence of new risks on the international front (trade-war etc.) could have a direct bearing on our exchange rate assumptions as well, and added, "We no longer expect the marginal degree of appreciation (Q2 vs. Q1) that we had previously pencilled in. We now expect the USD/INR pair to trade in the range of 64.5 – 65.5 in the short term." &nbsp;

Inflation Dynamics&nbsp;

In the February meeting, the RBI had revised its inflation forecast for the fourth quarter (2017-18) to 5.1% from 4.3%-4.7% earlier. Inflation print is now expected to be lower than the RBI’s estimate in Q4 (so far the average has been 4.8%). &nbsp;

Going ahead in FY19, CPI inflation could inch-up to around 5.6% in June. We expect average inflation of 5.1% in H1-FY19 with much of the rise likely to be on account of an adverse base. Thereafter, in 2H-FY19, while the base effect could be favourable and lead to some moderation in inflation, a lot would depend on how other factors pan out. Price of crude oil, potentially higher minimum support prices, the impact of housing rent allowance increase by several state governments, besides the performance of monsoon are some risks that could emerge in 2H-FY19, warranting a reasonable degree of caution by the RBI. &nbsp;

Given the recent softer inflation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19. Upside risks to inflation are detailed below:&nbsp;

1. Core inflation pressures building up&nbsp;

Rising core: Core inflation (excluding food, fuel and petrol and diesel) has been sticky in the past three months, remaining unchanged at 5.1%. Prior to this, it had gradually risen from 3.9% in June 2017 to 5.1% in December 2017.

<img alt="1111.PNG" data-entity-type="" data-entity-uuid="" height="430" src="https://images.wionews.com/iniline-images/1111.PNG" width="770" />

46% of the core items are seeing an upward pressure. (Source: CEIC, HDFC Bank)

&nbsp;

46% of the items in core are rising versus only 9% last year: Our analysis shows that between June 2017 and February 2018, 46% of the core items have seen upward pressures while 45% of the items have remained sticky. Only 9% of the items have seen a fall. This is in contrast to the trend seen between May 2016 and May 2017, when only 9% of the core items were rising while 44% of the items where seeing a downward pressure.&nbsp;

<img alt="2222.PNG" data-entity-type="" data-entity-uuid="" height="430" src="https://images.wionews.com/iniline-images/2222.PNG" width="770" />

Service inflation has been risen more than manufacturing. (Source: CEIC, HDFC Bank)

Services inflation is leading the upswing, rising to 5.7% in February from 4.4% in the beginning of the financial year (April 2017). This indicates that any downside pressures due to the introduction of GST on service prices, as was expected, has been offset by other core items or has not filtered through to retail prices.&nbsp;

2. Return of oil pressures: Crude oil prices posted their biggest weekly gain in eight months with rising geopolitical risk in the Middle East and Saudi Arabia hinting that the current OPEC output cuts could be extended into 2019.&nbsp;

MSPs risk: In the Union Budget 2018-19, the government had announced that MSPs will be set at 1.5 times the cost of production. The impact of this increase is dependent on the definition of cost used. According to our estimates, a 1.5 times increase over the A2+FL costs could lead to a 5060bps increase in headline inflation. The RBI has also highlighted the increase in MSPs as a key risk in the past and is likely to reiterate the same in the April 5 policy meeting. That said, the RBI is likely to wait and watch before the final decision on MSPs is announced in May this year, before making changes to its stance or forecasts. &nbsp;&nbsp;

Global Dynamics&nbsp;

Change in the outlook of oil prices and the emergence of new risks on the international front (trade-war etc.) could have a direct bearing on the exchange rate assumptions and thus on the overall monetary policy equation of the RBI. &nbsp;

The report summed up saying "there are global factors that the RBI needs to watch out for, and perhaps act during phases of extreme volatility. Rupee movement in 2018 is likely to be marginal in our view but it’s important to keep a tad of exchange rate risks in an environment of tightening monetary policies globally and rising concerns of a full-blown trade war. Therefore, a status-quo for the major part of the year is the most likely scenario for the RBI. The rate hike could happen in the last quarter of FY19." &nbsp;

India Inc expects the Reserve Bank of India (RBI) to maintain its hawkish stance in its first bi-monthly monetary policy review of the new fiscal.

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at its upcoming monetary policy review on April 5th. Despite downside surprises in the recent inflation readings, the Central Bank is likely to stay hawkish on account of two factors. One, there could be caution related to higher Minimum support prices (MSPs) that the government could offer to farmers in line with its budget ‘commitment’ and because of surging oil prices. Second, core inflation has become more broad-based and is markedly high for categories like services, said HDFC Bank treasury research paper today, adding that increase in components of salaries (like housing allowance) due for employees of the state governments could add to these pressures. "We would also parse the commentary carefully for the RBI’s assessment of global risks such as an economically costly trade war between the US and its major trading partners, comments from the White House on dismantling or diluting trading arrangements like NAFTA, regulatory push-backs in industries like tech on the back of the recent controversy on data leaks, and finally geopolitical tensions with Russia and China (likely to flex their muscles) and the US taking a harder line on Iran and North Korea," said the paper, while adding that this may or may not directly lead to a change in monetary stance, but the central bank’s view on how prepared the domestic economy and markets are to face these risks become important. The report said that change in the outlook of oil prices and emergence of new risks on the international front (trade-war etc.) could have a direct bearing on our exchange rate assumptions as well, and added, "We no longer expect the marginal degree of appreciation (Q2 vs. Q1) that we had previously pencilled in. We now expect the USD/INR pair to trade in the range of 64.5 – 65.5 in the short term." Inflation Dynamics In the February meeting, the RBI had revised its inflation forecast for the fourth quarter (2017-18) to 5.1% from 4.3%-4.7% earlier. Inflation print is now expected to be lower than the RBI’s estimate in Q4 (so far the average has been 4.8%). Going ahead in FY19, CPI inflation could inch-up to around 5.6% in June. We expect average inflation of 5.1% in H1-FY19 with much of the rise likely to be on account of an adverse base. Thereafter, in 2H-FY19, while the base effect could be favourable and lead to some moderation in inflation, a lot would depend on how other factors pan out. Price of crude oil, potentially higher minimum support prices, the impact of housing rent allowance increase by several state governments, besides the performance of monsoon are some risks that could emerge in 2H-FY19, warranting a reasonable degree of caution by the RBI. Given the recent softer inflation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19. Upside risks to inflation are detailed below: 1. Core inflation pressures building up Rising core: Core inflation (excluding food, fuel and petrol and diesel) has been sticky in the past three months, remaining unchanged at 5.1%. Prior to this, it had gradually risen from 3.9% in June 2017 to 5.1% in December 2017. 46% of the core items are seeing an upward pressure. (Source: CEIC, HDFC Bank) 46% of the items in core are rising versus only 9% last year: Our analysis shows that between June 2017 and February 2018, 46% of the core items have seen upward pressures while 45% of the items have remained sticky. Only 9% of the items have seen a fall. This is in contrast to the trend seen between May 2016 and May 2017, when only 9% of the core items were rising while 44% of the items where seeing a downward pressure. Service inflation has been risen more than manufacturing. (Source: CEIC, HDFC Bank) Services inflation is leading the upswing, rising to 5.7% in February from 4.4% in the beginning of the financial year (April 2017). This indicates that any downside pressures due to the introduction of GST on service prices, as was expected, has been offset by other core items or has not filtered through to retail prices. 2. Return of oil pressures: Crude oil prices posted their biggest weekly gain in eight months with rising geopolitical risk in the Middle East and Saudi Arabia hinting that the current OPEC output cuts could be extended into 2019. MSPs risk: In the Union Budget 2018-19, the government had announced that MSPs will be set at 1.5 times the cost of production. The impact of this increase is dependent on the definition of cost used. According to our estimates, a 1.5 times increase over the A2+FL costs could lead to a 5060bps increase in headline inflation. The RBI has also highlighted the increase in MSPs as a key risk in the past and is likely to reiterate the same in the April 5 policy meeting. That said, the RBI is likely to wait and watch before the final decision on MSPs is announced in May this year, before making changes to its stance or forecasts. Global Dynamics Change in the outlook of oil prices and the emergence of new risks on the international front (trade-war etc.) could have a direct bearing on the exchange rate assumptions and thus on the overall monetary policy equation of the RBI. The report summed up saying "there are global factors that the RBI needs to watch out for, and perhaps act during phases of extreme volatility. Rupee movement in 2018 is likely to be marginal in our view but it’s important to keep a tad of exchange rate risks in an environment of tightening monetary policies globally and rising concerns of a full-blown trade war. Therefore, a status-quo for the major part of the year is the most likely scenario for the RBI. The rate hike could happen in the last quarter of FY19."

Repo rate likely to remain unchanged in monetary policy review: HDFC Bank report

The Reserve Bank of India will keep monetary policy steady at its April meeting but shift to a hawkish stance by the end of this year and raise interest rates early in 2019 as inflation pressures build, according to a Reuters poll of economists.

All 61 economists polled between March 23-28 expected the RBI to hold the repo rate at 6.00 percent and the reverse repo rate at 5.75 per cent at its April 4-5 policy meeting.

The RBI is expected to keep rates steady for the rest of this year.

After a slowdown in growth through much of last year, India is on an upswing and reclaimed top spot as the fastest growing major economy in the final quarter of 2017, outpacing China.

Inflation, on the other hand, has eased slightly, but still projected by the central bank to remain above its 4 per cent medium-term target in 2018.

"The recent strength of the economy has belatedly shifted the discussion from whether the RBI might cut policy rates again to whether it should hike," noted Shilan Shah, senior India economist at Capital Economics.

The RBI is expected to change its stance toward policy tightening by year-end, according to 60 per cent of 33 economists, including four respondents who thought the shift would come as early as its June meeting.

"With growth-inflation data likely to be higher after April, we believe there is a risk of more hawkish rhetoric at meetings in June and beyond, including a change in policy stance," wrote Sonal Varma, chief India economist at Nomura.

The latest consensus is for the RBI to hike the repo rate and the reverse repo rate by 25 basis points in the first three months of 2019 and follow it up with another one in the quarter through to end-December.

Just last month, the consensus was for the central bank to hold fire until at least the second half of 2019.

"The forecast for inflation suggests that after a temporary decline, which we have already seen, inflation will move slightly higher and this will force a hike," said Dariusz Kowalczyk, senior economist for ex-Japan Asia at Credit Agricole CIB.

After hitting a low of 1.46 per cent in June 2017, consumer price inflation steadily rose to a 17-month high in December. However, February's inflation print showed inflation at 4.4 per cent, giving the RBI a breather.

According to the central bank's own projections, inflation is likely to average 5.1-5.6 per cent for the first half of the 2018-19 fiscal year, before hovering around 4.5 per cent for the remainder of the year.

While the median consensus of economists predicts a rate hike early next year, almost a third of respondents forecast the RBI will lift rates by the end of September.

Several of them also expect another rate hike before end-2018.

Against a backdrop of government fiscal slippage, the RBI would focus on "price stability", higher bond yields and sticky inflation near the upper band of its target, according to Vishnu Varathan, head of economics and strategy at Mizuho Bank.

"The fact that evidence of underlying inflation is picking up...should tilt them towards one rate hike to calibrate policy," Mizuho's Varathan said.

"The growth story is also going to align nicely with the RBI's position because we are coming off a soft base after the demonetization and GST impact ... the policy decision becomes less of a dilemma and the clarity with which they need to act solidifies in the second half of this year."

If the RBI does raise rates when expected, it would follow other major central banks which are already tightening policy.

The US Federal Reserve raised rates in March and is expected to follow it up with three more hikes this year, according to a separate Reuters poll.

The RBI is expected to keep rates steady for the rest of this year

The Reserve Bank of India will keep monetary policy steady at its April meeting but shift to a hawkish stance by the end of this year and raise interest rates early in 2019 as inflation pressures build, according to a Reuters poll of economists. All 61 economists polled between March 23-28 expected the RBI to hold the repo rate at 6.00 percent and the reverse repo rate at 5.75 per cent at its April 4-5 policy meeting. The RBI is expected to keep rates steady for the rest of this year. After a slowdown in growth through much of last year, India is on an upswing and reclaimed top spot as the fastest growing major economy in the final quarter of 2017, outpacing China. Inflation, on the other hand, has eased slightly, but still projected by the central bank to remain above its 4 per cent medium-term target in 2018. "The recent strength of the economy has belatedly shifted the discussion from whether the RBI might cut policy rates again to whether it should hike," noted Shilan Shah, senior India economist at Capital Economics. The RBI is expected to change its stance toward policy tightening by year-end, according to 60 per cent of 33 economists, including four respondents who thought the shift would come as early as its June meeting. "With growth-inflation data likely to be higher after April, we believe there is a risk of more hawkish rhetoric at meetings in June and beyond, including a change in policy stance," wrote Sonal Varma, chief India economist at Nomura. The latest consensus is for the RBI to hike the repo rate and the reverse repo rate by 25 basis points in the first three months of 2019 and follow it up with another one in the quarter through to end-December. Just last month, the consensus was for the central bank to hold fire until at least the second half of 2019. "The forecast for inflation suggests that after a temporary decline, which we have already seen, inflation will move slightly higher and this will force a hike," said Dariusz Kowalczyk, senior economist for ex-Japan Asia at Credit Agricole CIB. After hitting a low of 1.46 per cent in June 2017, consumer price inflation steadily rose to a 17-month high in December. However, February's inflation print showed inflation at 4.4 per cent, giving the RBI a breather. According to the central bank's own projections, inflation is likely to average 5.1-5.6 per cent for the first half of the 2018-19 fiscal year, before hovering around 4.5 per cent for the remainder of the year. While the median consensus of economists predicts a rate hike early next year, almost a third of respondents forecast the RBI will lift rates by the end of September. Several of them also expect another rate hike before end-2018. Against a backdrop of government fiscal slippage, the RBI would focus on "price stability", higher bond yields and sticky inflation near the upper band of its target, according to Vishnu Varathan, head of economics and strategy at Mizuho Bank. "The fact that evidence of underlying inflation is picking up...should tilt them towards one rate hike to calibrate policy," Mizuho's Varathan said. "The growth story is also going to align nicely with the RBI's position because we are coming off a soft base after the demonetization and GST impact ... the policy decision becomes less of a dilemma and the clarity with which they need to act solidifies in the second half of this year." If the RBI does raise rates when expected, it would follow other major central banks which are already tightening policy. The US Federal Reserve raised rates in March and is expected to follow it up with three more hikes this year, according to a separate Reuters poll.

RBI to take hawkish stance by end-2018, hike rates early next year: Reports

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