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*Repo Rate* 📈 Deciphering the Repo Rate: A Key Pillar of Monetary Policy. It's more than just a number. As financial professionals, understanding its impact is crucial. Here's why: ·        Monetary Policy Lever: Repo Rate adjustments by central banks regulate liquidity, influencing borrowing and spending patterns. ·        Market Barometer: Changes in Repo Rates signal market shifts, impacting investor sentiment and borrowing costs. ·        Economic Indicator: Repo Rate movements reflect central banks' strategies to manage inflation and spur economic growth. In a dynamic economic landscape, grasping the Repo Rate's nuances is essential for informed decision-making. Stay tuned for more insights. ------------------------------------------------------------------------------------------ RBI Repo rate: The Reserve Bank of India (RBI) governor ShaktiKanta Das announced the Monetary Policy Committee's (MPC) decision on interest rates after the two-day review meeting of the central bank's Monetary Policy Committee (MPC), the rate-setting panel. The meeting commenced on April 3 and concluded today (April 5). In the first MPC announcement in Financial Year 2024-25 (FY25), RBI governor kept the repo rate unchanged at 6.5 per cent for seventh consecutive time. Repo is the rate at which the central bank lends money to banks for the short term. What RBI governor said on repo rate? RBI governor said that the MPC will remain watchful of food inflation and the six-member rate-setting panel had favoured the status quo on interest rates by a majority vote of 5:1 while maintaining focus on withdrawal of accommodative stance. What RBI governor said on GDP growth? The RBI governor announced that there will be no changes in the GDP growth forecast for FY25 and the estimate was retained at 7 per cent for the current fiscal year. What RBI governor said on inflation? On the inflation front, the RBI MPC sees it at 4.5 percent for FY25. He said, “Inflation is on a declining trajectory and GDP growth is buoyant. At this juncture we should not lower our guard but continue to work towards ensuring that inflation aligns durably to the target.” “With rural demand catching up, consumption is expected to support growth in FY25. The RBI has projected a retail inflation of 4.5 per cent in fiscal 2024-25. It has projected an inflation of 4.9 per cent in Q1, 3.8 per cent in Q2, 4.6 per cent in Q3 and 4.5 per cent in Q4 of FY25,” he added. Source- HT News Desk #Finance #Economics #MonetaryPolicy #RepoRate #MarketTrends Regards, Sahil

I found these points interesting in RBI Governor’s Statement: April 5, 2024 -- The Monetary Policy Committee (MPC) met on 3rd, 4th and 5th April 2024. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, it decided by a 5 to 1 majority to keep the policy repo rate unchanged at 6.50 per cent. Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. -- Rationale for these decisions. Since the last policy, the growth-inflation dynamics have played out favourably. Growth has continued to sustain its momentum surpassing all projections. Headline inflation has eased to 5.1 per cent during January and February 2024 from 5.7 per cent in December 2023, with core inflation declining steadily over the past nine months to its lowest level in the series.1 Fuel component of the CPI remained in deflation for six consecutive months.2 Food inflation pressures, however, accentuated in February. -- Looking ahead, robust growth prospects provide the policy space to remain focused on inflation and ensure its descent to the target of 4.0 per cent. As the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risks to inflation that might derail the path of disinflation. Under these circumstances, monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission of the past actions. The MPC, therefore, decided to keep the policy rate unchanged at 6.50 per cent in this meeting and remain focused on withdrawal of accommodation. The MPC will remain resolute in its commitment to aligning inflation to the target. -- In the last monetary policy statement, I had expressed concerns about the high levels of public debt in both advanced and emerging market economies (EMEs). These are dormant risks which could erupt abruptly. Debt to GDP ratios, which rose during the pandemic, remain elevated and are projected to increase further with rising interest burden and cost of borrowing, thus raising debt sustainability concerns.6 Worsening debt situation in advanced economies (AEs) can generate spillovers for EMEs in the form of swings in capital flows and volatility in financial markets. EMEs with rising levels of public debt, in particular, would be vulnerable to these spillover effects. Credible fiscal consolidation plans, particularly in major advanced economies, focusing on growth enhancing investment would be necessary to address this challenge. India, however, presents a different picture on account of its fiscal consolidation and faster GDP growth.

My Analysis: Expect no Rate Cuts It is indeed unlikely that the RBI's Monetary Policy Committee (MPC) will cut rates in the near future. One of the key reasons is the central bank's focus on controlling inflation and maintaining economic stability. The MPC has maintained the repo rate at 6.5% since February 2023, and there is a strong consensus among analysts and experts that this rate will likely remain unchanged in the upcoming policy review [[❞]](https://lnkd.in/dYT3t4UE) [[❞]](https://lnkd.in/dutJq-Gh). Moreover, the RBI has been resorting to unconventional methods to manage excess liquidity in the market. These methods include open market operations (OMOs) and the use of instruments like the standing deposit facility (SDF), which help absorb surplus liquidity without altering the policy rates directly. This approach helps in managing inflation and stabilizing the economy while avoiding the potential negative impacts of frequent rate changes [[❞]](https://lnkd.in/dCJNXPPa). Given the current economic indicators and inflationary pressures, a rate cut does not seem imminent. The RBI is expected to continue its cautious approach, closely monitoring economic conditions and using a mix of conventional and unconventional tools to achieve its monetary policy objectives.

2 year UK fixed rate (4.64%) is trading at a discount to SONIA (5.19%) and the 2 year EUR fixed rate (2.97%) is ~1.0% below 3 month euribor (3.95%) implies that financial markets have already priced in a number of rates cuts over the next 2 years. Read More below #euribor #sonia #ECB #BoE #interestrate #inflation

RBI Monetary Policy Update - Maintains Prolonged Pause RBI MPC in its policy meeting kept the key policy rates unchanged at 6.50% as expected and is in line with market expectations. This is the fifth consecutive pause by the MPC, after the last increase in the repo rate by 6.5% in Feb 2023 to 250 bps since May 2022. Monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmissions. Debt markets had already factored today’s status quo and hence there was not much movement on government bond yields initially at the start of the policy announcement. However, yields softened slightly as there was no liquidity tightening measures. Bond markets remained largely stable post the announcement of the policy as it was on expected lines. The Reserve Bank will remain nimble in liquidity management. With regard to the standing facilities of the Reserve Bank under the LAF, high utilization of both MSF and SDF by the banks have been noticed. This was pointed out in the last monetary policy statement. RBI has decided to allow reversal of liquidity facilities under both SDF and MSF even during weekends and holidays with effect from December 30, 2023. It is expected that this measure will facilitate better fund management by the banks. This measure will be reviewed after six months or earlier, if needed. Overall, in our view, it was a less hawkish policy as compared to the previous policy and strong emphasis on bringing inflation to 4%. Going forward, RBI MPC is expected to maintain a prolonged pause until there is a clear visibility of inflation falling down to the 4% target. Headline inflation continues to remain volatile due to multiple supply side shocks. The central bank will be focused on curbing money supply in the economy to control inflationary pressure. The near-term outlook remains watchful by risks to food inflation which might lead to an uptick in inflation in November and possibly in December. However, given its focus on 4% inflation target and economy persisting along at 6.5% growth rate, the interest rate cycle appears to have peaked and we don’t expect any rate cuts in FY24 and easing in the rate cycle to be further delayed to H2 of next fiscal year. In this current context, we continue to focus on accrual strategy across the yield curve from a high risk-reward perspective. Investors with a longer-term investment horizon may continue to look at actively managed short to medium term funds.

The ECB will be taking a close look at the just-released Bank Lending Survey when setting the communication tomorrow.   The backward-looking measures all exhibit continued improvements in both credit standards and credit demand. Depicted below are the Credit standards for house purchases, which have been easing since the peak in Q4 2022. However, the forward-looking measure is expecting a reversal to tighter credit standards in Q1. The picture is similar for household credit. Credit demand is expected to increase.   Businesses are also expecting to demand more credit going forward, after several quarters of contraction. Credit standards have decreased over the last year, but they are expected to tighten in Q1 as well.   This goes to show that the ECB’s monetary tightening is still working its way through the European economy and that we are by no means out of the woods. I expect that the ECB will be hesitant to cut interest rates despite a benign inflation backdrop and a struggling economy. Markets are currently only assigning a 60% chance of a rate cut in April, and the first full rate cut priced in at the June meeting.   I strongly expect that keeping (real) rates higher for longer will turn out as a strong headwind for European economies in general and the German economy in particular. #finance #investing #assetallocation #interestrates #ecb #macro #macroeconomics

𝗧𝗼𝗱𝗮𝘆'𝘀 𝗺𝗮𝗿𝗸𝗲𝘁 𝗻𝗲𝘄𝘀, 𝘄𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 𝗮𝗻𝗱 𝗵𝗼𝘄 𝘄𝗲 𝗮𝘁 Capex Currency 𝗰𝗮𝗻 𝗵𝗲𝗹𝗽: Inflation eased slightly in March, dropping to a 2.5-year low, signalling potential shifts in the economic landscape. With core inflation also declining, attention turns to potential Bank of England rate adjustments.   𝗪𝗵𝗮𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 𝗱𝗼 & 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿:   ⚖️ 𝗥𝗶𝘀𝗸 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Businesses involved in import/export activities should reassess risk management strategies in response to changing currency values and interest rate expectations. Effective hedging against currency fluctuations and interest rate changes is essential to mitigate financial risks.   💱 𝗖𝘂𝗿𝗿𝗲𝗻𝗰𝘆 𝗩𝗮𝗹𝘂𝗲 𝗙𝗹𝘂𝗰𝘁𝘂𝗮𝘁𝗶𝗼𝗻𝘀: Lower-than-expected inflation may impact the value of the British Pound (GBP) in the foreign exchange market, leading to fluctuations in currency exchange rates. If you're engaged in international trade or transactions should monitor these changes closely.   📈 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲 𝗘𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀: The possibility of a Bank of England rate cut in the summer could influence borrowing costs. This may affect investment decisions and financial planning strategies, requiring careful consideration and adaptation.   📊 𝗠𝗮𝗿𝗸𝗲𝘁 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆: Increased uncertainty surrounding interest rate adjustments and currency value fluctuations may result in heightened market volatility. Businesses need to remain agile and implement flexible strategies to navigate these changes effectively.   At Capex, we provide valuable market insights and expertise to help you make informed decisions. Our range of corporate tools and strategies is designed to assist you in managing currency risk and enhancing your financial outcomes.    Feel free to connect with us today to explore our FX solutions. #internationalpayments #fx #currency #interestrates

Fixed income markets rebounded in Q2 2024. Interest rate cuts by the Bank of Canada and ECB, along with narrowing credit spreads, bolstered returns. The outlook for fixed income remains positive for 2024. Learn more in this latest commentary by Owen Morgan. https://lnkd.in/gt5GHin7 #FixedIncome #MarketReview #Investing