PACE 360’s Post

RBI Monetary Policy: Here are 5 key things to look for tomorrow 1. Repo Rate Unchanged: The RBI has maintained the repo rate at 6.5 percent since April 2023, indicating a continuation of the monetary policy stance without any adjustment in this round. 2. Monetary Policy Stance: The current stance of the RBI is towards the withdrawal of accommodation, suggesting a bias towards potential rate hikes rather than cuts. This stance is expected to remain unchanged, according to the majority of economists and bankers. 3. GDP Growth Projection: While the RBI had projected a GDP growth rate of 7 percent for FY25 in the February policy review, there's an expectation among experts that the central bank might revise this projection based on the surprise increase in the third quarter of FY24. 4. Inflation Target: Despite inflation being above the RBI's medium-term target of 4 percent, experts anticipate minor adjustments in the inflation forecast, particularly due to easing fuel and cooking gas prices. However, no significant lowering of the inflation target is expected. 5. Liquidity Measures: The RBI is likely to continue its fine-tuning of liquidity through repo and reverse repo auctions. Experts suggest that the central bank may prefer to micromanage daily liquidity positions without announcing advance measures to manage liquidity, indicating a continuation of current liquidity management strategies.

RBI Working Paper No. 03/2024 Equity Markets and Monetary Policy Surprises This paper studies the impact of monetary policy announcements on the returns and volatility in the BSE Sensex by decomposing changes in Overnight Indexed Swap (OIS) rates on policy announcement days into target and path factors. The target factor captures the surprise component in central bank policy rate action, while the path factor captures the impact of central bank communication on market expectations regarding the future path of monetary policy. The major findings of the paper are: (i) The empirical analysis using daily data suggests that equity returns are impacted only by the path factor (i.e., the market’s expectations of future monetary policy trajectory), while both target and path factors (both of which capture the unanticipated component of monetary policy) impact the volatility in equity prices. (ii) An event study analysis undertaken by constructing short-duration windows around the monetary policy announcements using intraday data also indicates that the path factor helps explain changes in equity returns. While the short-duration windows are aimed at controlling for other potential drivers of equity prices, it may be noted that the monetary policy announcements are accompanied by regulatory and developmental measures that can also impact markets. The sparse trading on occasion in the OIS markets as well as other domestic and global developments during the narrow window can also impact the analysis. 

The rise in bank stocks this year reflects broader economic trends, but no banks from regulation-heavy continental Europe are in the top 20. theScreener examines which banks are leading the way, highlighting growth opportunities and dividend prospects in the latest sector analysis. Learn more: https://lnkd.in/e9Mj8XMQ #BankingInsights #MarketAnalysis #theScreener #InvestmentTrends

RBI kept the benchmark repo rate unchanged at 6.5% for the eight consecutive time and continue with its stance of ‘withdrawal of accommodation’. RBI also raised its GDP growth forecast for FY25 to 7.2% from 7% earlier. The central bank retained FY25 inflation forecast at 4.5%. All eyes were on RBI as yesterday ECB went ahead of the Federal Reserve and cuts the Interest Rates for the first time since 2019. Market consensus expect the first interest rate cut in the month of October with possibility of only 2 rate cuts this year. The next RBI MPC meeting is scheduled on 6th August, 2024. Do you expect an Interest Rate Cut in the next meeting? https://lnkd.in/dM3wy5AK

The much-awaited rate cut cycle has started. Swiss National Bank announced a surprise rate cut of 25 BPS in its latest monetary policy outcome. The first central bank to announce a rate cut in 2024, expecting the same outcome from the Federal Reserve Board in May or June. Reserve Bank of India (RBI) will also announce the rate cut after the nation's general elections. The best strategy/technique to capitalize on this rate cut: 👉 The best strategy is to park the medium to short-term surplus in long-term govt bonds, Where there is zero credit risk. Significance of this strategy: 👉 When interest rates come down in the economy, for many institutions, HNIs & UHNIs make bonds attractive. 👉 And the bond market attracts the money & this flow will push the bond prices. Investing early in the bonds makes it possible to grab the prices at a lower cost & higher YTM. Why only govt bonds & why not corporate bonds? Investing in corporate bonds requires a comprehensive liquidity analysis of the company and where credit risk exists. By Investing in Govt bonds, one can escape from the credit risk, and interest rate risk will also be zero since central banks are set to announce rate cuts. How to Invest in it: There are two ways to take this exposure: 1. Investing in Govt securities Investing mutual funds. Or 2. Investing directly in Govt securities. This strategy won't create any magical returns. It's just to park surplus in a risk-free avenue.

#Interestrates + #CapitalMarkets ☑ While both the #Fed and #BoE held rates and delivered mildly dovish messages this week, the #BankOfJapan delivered its first rate increase in 17 years and ended #yieldcurvecontrol. ✅ Checkout our latest thinking on #FedPolicy and its impact on the #economy and #capitalmarkets here: #investing #jobs #finance #wealthmanagement #equities #bonds #municipalbonds #inflation #recession #investingstrategy #clientdevelopment #CentralBanks #TaxEfficient https://lnkd.in/gJrFmEpA

🤵 The Macro Butler Weekly Digest 🤵 🌐 Until Keynesian policies prevail, the central banking masquerade over rate cuts misses the real point: how impotent monetary policies have become as fiscal dominance leads to more bankers’ wars. 🌐 Read more here:  https://lnkd.in/gH6icQ6q

**Recap of Last Week's Major Central Bank Decisions** Federal Reserve US Interest Rate: 5.5% Current Decision: The Federal Reserve has kept the current interest rate unchanged for the eighth consecutive meeting. Future Indications: Chairman Jerome Powell has hinted at the possibility of a rate cut in September, contingent on favourable economic data. This is the first time he has suggested a potential rate cut for a specific upcoming meeting. Policy Statement: The latest statement shows a balanced approach towards both inflation and employment goals, moving away from an exclusive focus on inflation. Inflation Progress: Although there has been some progress in reducing inflation, additional evidence is needed before implementing any policy rate reductions with confidence. Bank of Japan Interest Rate: 0.25% Recent Change: The interest rate was increased by 0.15%, marking a gradual shift from its historically ultra-loose monetary policy. Bond Purchase Reduction: Plans have been announced to reduce Japanese Government Bond purchases by approximately 50% by the first quarter of 2026. Future Rate Hikes: Any further increases in interest rates will be contingent on economic data. Background: The Bank of Japan has maintained an ultra-loose monetary policy for decades, including the use of negative interest rates from 2016 until recently. Under Governor Ueda, the bank is beginning to transition towards policy normalisation. These unconventional measures were initially introduced to combat persistent deflation, encourage consumer spending, and stimulate economic growth. Bank of England Interest Rate: 5% Recent Decision: The Monetary Policy Committee narrowly voted (5 in favour, 4 against) to implement the first rate cut of the current cycle, lowering the rate by 0.25%. Governor's Stance: Governor Andrew Bailey supported the rate cut. Future Guidance: The bank did not provide clear indications for future rate decisions, emphasizing reliance on forthcoming economic data. Market Advisory: The bank cautioned against expectations of a return to zero interest rate policies (ZIRP), highlighting that past conditions were exceptional. Growth Projections: The growth forecast for 2024 has been revised to a more optimistic outlook.

For UK Financial Professionals. Our latest Treasury & Investment Office update is now live. Markets have experienced another strong week, driven in part by growing confidence that monetary policy loosening is on the horizon, following a number of central bank announcements this week which struck a dovish tone with investors.. Our weekly updates now come with an additional market roundup which you can download and share with your clients. Read the full update here:https://ow.ly/KP8j50R1W8Y

RBI Monetary Policy 2024 Highlights: Key Decisions and Market Impact 👇 Repo Rate Unchanged at 6.5% RBI Governor Shaktikanta Das announced that the Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5% for the 11th consecutive meeting. The monetary policy stance remains ‘Neutral.’ CRR Cut by 50 bps to 4% The Cash Reserve Ratio (CRR) has been reduced by 50 basis points to 4%. This move is expected to inject additional liquidity into the banking system and boost credit flow. New Benchmark: Secured Overnight Rupee Rate (SORR) To enhance the credibility of interest rate benchmarks and develop the derivatives market, the RBI will introduce the Secured Overnight Rupee Rate (SORR). This benchmark will be based on secured money market transactions, including overnight repo and TREPS. SFBs to Offer Credit Lines via UPI Small Finance Banks (SFBs) have been permitted to extend pre-sanctioned credit lines through UPI. This initiative aims to deepen financial inclusion, especially benefiting ‘new-to-credit’ customers. Inflation Projections Raised for FY25 The RBI revised its FY25 CPI inflation target upward to 4.8% (from 4.5%). Q3 FY25: Increased to 5.7% (from 4.8%). Q4 FY25: Increased to 4.5% (from 4.2%). Q1 FY26: Increased to 4.6% (from 4.3%). Q2 FY26: Estimated at 4%. GDP Growth Estimate Lowered The FY25 GDP growth projection has been cut to 6.6% (from 7.2%). Q3 FY25: Revised to 6.8% (from 7.4%). Q4 FY25: Revised to 7.2% (from 7.4%). Q1 FY26: Revised to 6.9% (from 7.3%). Q2 FY26: Estimated at 7.3%. Impact on Markets Indian equity markets (Sensex and Nifty 50) turned positive after the CRR cut announcement, signaling optimism among investors. Stay tuned for further updates as the RBI’s policy measures unfold and their implications become clearer for the financial markets and the broader economy.