Fitch expects 25 basis point increase in RBI, cuts 2023-24 growth hopes to 6.2% – Mintpaisa

Fitch Ratings on Tuesday cut its 2023-2024 growth expectation for India to 6.2% from the 6.7% level it forecast in September, with global growth expected to fall to just 1.4% in 2023 from a previously estimated 1.7% – the weakest expansion since 2008.

Ahead of the central bank’s monetary policy review to be unveiled on Wednesday, the global rating agency said it expects the Reserve Bank of India (RBI) to raise the benchmark rate to 6.15. % this month and maintains this level until 2023.

“The RBI has raised rates by a cumulative 190 basis points (bps) since the start of the tightening cycle in April 2022, lagging the Fed’s 350 bp increases over the same period,” the firm said in its statement. December global economic outlook report. . One basis point equals 0.01%. “The RBI has already stepped in to support the rupee and further rate hikes are likely to support the currency and reduce underlying inflationary pressures,” he added.

“We now expect the RBI to raise policy rates to 6.15% by December and then maintain that rate throughout 2023,” he said, implying that the monetary policy committee of the bank could opt for a slower rise of 25 basis points at its last meeting whose decisions will be announced on Wednesday by the governor of the RBI, Shaktikanta Das.

In September, the rating agency said it expected India’s policy rates to peak in the “near future” and remain at 6% through 2023.

Although retail price inflation declined to 6.77% in October, core inflation rose slightly again after moderating over the summer and household inflation expectations remain high, with food price inflation remaining elevated, Fitch warned. “The weakness of the Rupee against the US Dollar adds to the inflationary concerns of the RBI given that one-third of the CPI basket is made up of imports,” he pointed out.

Fitch maintained its estimate of India’s GDP growth for 2022-23 at 7%, noting that the economy’s 6.3% rise in the second quarter was higher than its forecast of 5.5%. The July-September quarter was indeed stronger than Fitch’s expectations for the world as a whole, leading it to revise its 2022 global growth forecast upward from 2.4% to 2, 6%.

Although India is to some extent insulated from global economic shocks given the domestic nature of its economy, it is not immune to global developments, Fitch noted.

“The global economic slowdown is expected to reduce demand for Indian exports and the weakness is already evident in recent data – exports of goods fell for the first time in almost two years, notably in textiles, petroleum products and engineering goods. Tighter monetary policy and high inflation have also contributed to slower imports, slower growth in personal loans and lower purchasing power,” he added. .

Source link

Exit mobile version