EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Growth Gains But Inflation Pains: RBI's view on Indian Economy

April 29, 2024 12:42 PM UTC

Minutes of the latest Reserve Bank of India (RBI)'s monetary policy committee meeting revealed a nuanced outlook blending optimism regarding India's growth trajectory with apprehensions surrounding inflationary risks. While upbeat macroeconomic indicators paint a favourable picture, the committee re

RBI Holds Rates Firm, Citing Room for Economic Growth

April 11, 2024 5:44 AM UTC

In line with our expectations, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) chose to maintain the policy repo rate at 6.5% in its latest meeting. The decision reflects their aim to gradually scale back stimulus measures while still supporting economic growth. It also unders

RBI to stand pat in April

April 4, 2024 7:25 AM UTC

The Reserve Bank of India (RBI) is gearing up to announce its first monetary policy decision for FY25 (April-March) on April 5. For the upcoming meeting, we anticipate that the RBI will likely keep the repo rate unchanged at 6.5%, given the optimistic outlook for economic growth and still elevated i

EM FX Outlook: Domestic Drivers Key

March 26, 2024 9:01 AM UTC

   In terms of spot EM FX projections domestic drivers remain critical, with a desire to avoid appreciation versus the USD for some countries.  Fed easing in H2 2024 should however help EMFX more broadly and allow some recovery in spot rates (e.g. Indonesian Rupiah (IDR), South African Rand (ZAR)

RBI Minutes Reveal a Cautious Committee

February 23, 2024 10:42 AM UTC

The Reserve Bank of India's (RBI) latest monetary policy decision, as reflected in the minutes of the February Monetary Policy Committee (MPC) meeting, presents a nuanced landscape of optimism about India's growth prospects, juxtaposed with concerns over inflation risks. The views of various MPC mem

EMFX: Carry and Domestic Fundamentals Rather Than the USD

February 22, 2024 10:00 AM UTC

Bottom Line: Most major EMFX currencies have performed better than the Euro or the Japanese Yen against the USD in 2024 (Figure 1).  This is due to carry trades in Latam, but elsewhere reflects global equity love on Indian equities or domestic fundamentals.  This resilience for Brazilian Real/Indi

Reserve Bank of India Review: No Rate Cut On The Horizon

February 12, 2024 6:25 AM UTC

The Reserve Bank of India's Monetary Policy Committee, led by Governor Shaktikanta Das, chose to keep the repo rate unchanged at 6.5% for the sixth consecutive time, aiming to support ongoing economic recovery while ensuring a sustained decline in inflation. Despite signs of inflation moderation and

Reserve Bank of India Preview: No Rate Cut In Near Term

January 31, 2024 11:11 PM UTC

The RBI will keep the repo rate unchanged at 6.5% during the upcoming monetary policy committee meeting on February 8th. The current tight stance is expected to persist until at least mid-2024, as the central bank foresees inflation averaging 5.4% year-on-year in FY24, ending on March 31, 2024, befo

India's Robust Q2 FY24 Economic Growth Defies Global Challenges

December 1, 2023 12:04 PM UTC

Figure 1: India GDP and leading growth sectors (% y/y)
Source: MOSPI, Continuum Economics
A significant driver of this impressive growth was the remarkable increase of 10.9% y/y in capital formation and a substantial 12.4% y/y surge in government spending. This was primarily driven by the government's

India's Current Account: Striking a Balance Amid Economic Shifts

October 13, 2023 10:36 AM UTC

Figure 1: India Current Account (US$bn)
Source: RBI
Closer scrutiny of the invisibles account reveals that the net receipts from services went down from US$ 39.07bn to US$ 35.1bn during the quarter. Similarly, net transfers declined from US$ 24.76bn to US$ 22.86bn. However, net outflow of income reduc

Reserve Bank of India: Cautious Yet Bullish

October 11, 2023 9:37 AM UTC

Between May 2022 and April 2023, the RBI had aggressively increased the repo rate by 250 basis points in response to various economic challenges. However, this time around, as seen since May, the committee has chosen not to proceed with another hike, indicating a pause in its tightening policy. The

India Q2GDP Review: Indian Economic Engine Resilient in the Face of Headwinds

September 1, 2023 2:15 PM UTC

Figure 1: India GDP growth (% y/y) 
Source: National Statistics Office, Continuum Economics
In line with our expectations, India’s Q1 FY24 (Q2 2023) growth came in at 7.8% y/y driven by high capital expenditure and robust service sector activity. Government spending, given a fairly generous outlay

Reserve Bank of India Maintains Interest Rates Amid Rising Inflation Concerns

August 14, 2023 7:24 AM UTC

Figure 1: India CPI Inflation and Policy Rate (%)
Source: Reserve Bank of India, Continuum Economics
While this decision to hold interest rates might seem counterintuitive in the face of rising inflation, it underscores a complex web of economic factors and considerations that could have influenced th

RBI’s Inflation Quandary: Rate Hold despite Inflation Rise

August 8, 2023 3:49 PM UTC

Figure 1: India CPI Inflation and Policy Rate (%)
Source: Continuum Economics
Following a sequence of assertive interest rate hikes since May 2022, the central bank managed to bring consumer price index-based inflation down to a two-year low of 4.3% y/y in May 2023. However, this achievement proved sh

RBI: Balancing Growth and Risks Amidst Uncertain Environment

June 30, 2023 2:50 PM UTC

The minutes of the meeting revealed that almost all MPCc members emphasised that inflation risks leaned towards the upside, while risks to growth tilted towards the downside. Despite revising down the inflation forecast for 2023 to 5.1% y/y, the members maintained caution due to worries about a poor

Steady Hand: India’s Reserve Bank to Hold Rates

June 6, 2023 2:58 PM UTC

Figure 1: India Consumer Price Inflation and Policy Rate (%)
Source: RBI, MOSPI, Continuum Economics
The RBI surprised the markets by keeping the repo rate unchanged at 6.5% in its last MPC meeting in April suggesting a potential end to the tightening cycle, as it took into account the moderation in f

India: Improving Fiscal Health, but Risks Loom

June 2, 2023 6:50 AM UTC

India's fiscal deficit surged by 78.5% y/y in April (the first month of this fiscal year), reaching INR 1.3tn, according to data from the Comptroller General of Accounts (CGA). Viewed from the perspective of the FY24 budget, this deficit represents 7.5% of the estimate. The rise in the fiscal defici

RBI INR 2,000 Note Scrapping: Minimally Disruptive

May 25, 2023 10:52 AM UTC

Minimal Disruption, Minimal Usage
The total value of INR 2,000 notes in circulation has declined to 10.8% of the total currency in circulation as of March 31, 2023, according to the latest data made available by the RBI. The limited availability of the INR 2,000 currency note in circulation is partly

India FY 2024 Budget Preview: Walking a Tight-rope

January 31, 2023 2:49 PM UTC

Figure 1: India’s Fiscal Balance and Deficit 
Source: Continuum Economics
Fiscal Consolidation Gains Unlikely 
The expected loss of growth momentum, in the wake of the Russia-Ukraine war and monetary tightening, alongside risks a protracted and deep global recession, is likely to be at the forefron

EM FX: USD Strength but Not Crisis

September 9, 2022 1:01 AM UTC

Figure 1: USD Rises More Slowly against Key EMs and Falls vs. Brazilian Real (Dec. 31, 2021 = 100)
Source: Continuum Economics
The USD surge against G10 currencies has not been replicated so far against bigger EM currencies for a number of reasons. Key points include:
Figure 2: 10yr Nominal Yield Spre

India Q2 GDP Preview: India's GDP Bounce Likely To Be Fleeting

August 30, 2022 9:23 AM UTC

Figure 1: Real GDP growth (% change y/y), average CPI (% change y/y, quarterly average) and Policy Rate (%, quarterly average)
Source: CEIC, Continuum Economics.
Growth likely to slow over 2022
India's Q2 GDP is scheduled for release Aug 31, and we expect a double digit figure of 13.5% y/y. Q1 GDP gr

EM Relief from Peak Fed Rates?

August 10, 2022 8:20 AM UTC

Figure 1: USD Real Effective Exchange Rate (2010 = 100)
Source: Datastream, Continuum Economics
Fed Peaking and EM FX and Bond Yields
Financial markets are now discounting that the Fed will finish tightening by the December FOMC meeting, and our June Outlook (here) highlighted the view that we will s