Inflation: RBI Raises Further Interest Rate – Bloomberg Surveys
Bloomberg surveys predict that the RBI will have a 25 basis-point hike, taking a 6.5% repurchase rate on August 1. Many investors and economists are watching if the monetary policy committee will shift to a hawkish stance. Consequently, this move will hurt the bond market.
The central bank of India is planning to make an additional hike on interest rates. This was after a second consecutive policy meeting in taking decisive actions to lead in stem capital outflows and inflation. The inflation is running well beyond the 4% medium-term target of the central bank. Meanwhile, the outlook sets to degrade as the oil prices remained higher and the currency drops. All of these pressured the Reserve Bank of India to act.
Elsewhere, the bond investors are starting to take shelter in debt for shorter terms. This is amid the concern that this could become a potential beginning of a tightening cycle.
“It’s a great time for the RBI to hike rates because people are worried about inflation and growth numbers are looking good. By December, if growth falls off, then hiking in December or later will get more difficult,” said R. Sivakumar, head of fixed income at Axis Asset Management, which oversees about $11.5 billion in assets.
Following the 25 basis-point hike on June, a rate move will take the target for a high in two years. The RBI has been driven into action in the midst of the existing market rout. Moreover, the escalating interest rates and strengthening dollar triggered this said market trout.
Indicators of rising domestic inflation include the economic recovery, escalating government prices for some food crops and increasing fuel cost.
The benchmark’s yield has a 45 basis-point increase this year with June’s 8% rise for the first time in three years. Meanwhile, the short-term yields made surged due to the additional policy tightening in the near term. Moreover, money managers such as Kotak Mahindra Asset Management Co trading debt growing in less than five years.
“The market view is that it won’t be a long rate-hike cycle. If they raise rates by 25 basis points and keep the stance neutral, markets will be okay. If they change the stance to tightening, then you’ll see bond yield going up to 8 percent,” said Arvind Chari, head of fixed income and alternatives at Quantum Advisors Pvt.
Inflation: The Inflation rate in Indonesia makes a slight increase in July
INFLATION – The annual inflation rate of Indonesia made a slight increase in July. This is because of the higher food prices and their pace remained in the target range of the central bank. This was according to a Reuters survey.
The consumer price index (CPI) is likely to make a 3.24% increase in July. This was according to Reuters’s poll with the median forecast of 12 economists. This was fractionally above the annual pace of 3.12% for June.
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