ET Wealth
12,248.2567.9
Stock Analysis, IPO, Mutual Funds, Bonds & More

Street may be starting to factor in rate hike possibility in 2020

The latest set of statistics seems to be changing the market perception on future rate action.

, ET Bureau|
Dec 13, 2019, 07.43 AM IST
0Comments
Agencies
Economic Growth
The Street is now slowly starting to factor in a rate hike in the RBI’s policy meetings in 2020.
Mumbai: Trouble never comes alone – and Thursday’s stats pile seems to have lent more credence to that rather dark proverb. Consumer inflation is rather uncomfortable, the latest data showed, even as factory output contracted at a rate not pencilled in by even the most conservative in business.

The Index of Industrial Production (IIP) contracted 3.8 per cent in October, while CPI inflation for November climbed to 5.5 per cent. November retail inflation numbers again exceeded the Reserve Bank of India’s target of 4 per cent, reflecting how onion prices have caused food inflation to spike. Contraction in IIP is an indicator of the slowdown pressures and weak demand in the economy despite 135 bps rate cuts by the central bank in the current cycle of rate easing.

The latest set of statistics seems to be changing the market perception on future rate action. The Street is now slowly starting to factor in a rate hike in the RBI’s policy meetings in 2020.

“If inflation continues to rise further, RBI may continue to maintain a pause at the February policy,” said Rahul Gupta, head of research - currency, Emkay Global Financial Services.

As supply side shocks continue to inflate consumer prices, fiscal policy measures could play a bigger role in addressing price as well as growth concerns. Nomura expects any further rate cut possibility only after April should prices ease by then after the harvest of the winter-sown crop.

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service