Rupee at Record Low: Can India Weather the Dollar Storm?

January 21, 2025 5:03 AM UTC

The Indian rupee has slumped to an all-time low of 86 against the US dollar, underscoring the pressure on emerging market currencies as the dollar index surges to multi-month highs. For India, this currency depreciation signals potential disruptions in financial markets, with equities and bonds—no

India CPI Review: CPI Cools but Target Not in Sight

January 16, 2025 2:27 PM UTC

India’s retail inflation eased to a four-month low of 5.22% in December 2024, driven by a seasonal decline in food prices, particularly vegetables and cereals. With inflation within the RBI’s target range, all eyes are on the upcoming monetary policy review for potential rate cuts.

EM Government Debt: BRICS Divergence

January 2, 2025 8:05 AM UTC

   Brazil and South Africa suffer from debt servicing costs outstripping nominal GDP, which will remain a concern unless a consistent primary budget surplus is seen – though S Africa enjoys a much longer than average term to maturity than Brazil.  India and Indonesia, in contrast, enjoy nominal

EMFX Outlook: Hit From Tariffs, Before Divergence

December 20, 2024 10:00 AM UTC

·        EM currencies on a spot basis will remain on the defensive in H1 2025, as we see the U.S. threatening and then introducing tariffs on China imports – 30% against the current average of 20%. China’s response will likely include a Yuan (CNY) depreciation to the 7.65 area on USD/CN

China Outlook: Construction and Trade Headwinds v Policy Stimulus

December 17, 2024 11:00 AM UTC

  We do see a package of stimulative fiscal policy measures for 2025 including Yuan1-3trn infrastructure spending; Yuan1trn funds to buy completed homes for affordable housing and Yuan1trn capital injection to the big six state banks. Some modest measures for low-income households and to boost soci

RBI Decision Review: RBI Balances Inflation and Growth with Neutral Policy

December 7, 2024 2:25 PM UTC

The RBI kept the repo rate unchanged at 6.5% but unexpectedly cut the CRR by 50 basis points to inject ₹1.16 lakh crore into the banking system. Growth forecasts for FY2025 were revised down to 6.6%, while inflation expectations rose to 4.8%. This cautious approach reflects the central bank’s fo

RBI Decision Preview: Growth Slackens, Inflation Soars: RBI’s Policy Tightrope

December 3, 2024 6:42 AM UTC

The Reserve Bank of India (RBI) is gearing up to announce its last monetary policy decision for 2024 on December 6. For the upcoming meeting, we anticipate that the RBI will likely keep the repo rate unchanged at 6.5%, given the recent uptick in inflation. The decision to hold rate will come despite

India CPI Review: CPI Hits New Heights

November 13, 2024 12:05 PM UTC

Bottom line: The latest CPI figure of 6.2% yr/yr underscores significant inflationary pressures within the Indian economy, primarily driven by food prices but also influenced by housing costs. With inflation now at a 14-month high, the RBI's response will be another rate hold in December. Earliest r

Imports Surge, Growth Slows: Indonesia’s Q3 GDP Falls Short of 5% Mark

November 11, 2024 6:43 AM UTC

Bottom line: Indonesia’s Q3 GDP growth slipped to 4.95% yr/yr in Q3, missing the 5% target as soaring imports weighed on the headline figure. Private consumption remained steady, while fixed investment showed resilience with notable gains. Looking ahead, Q4 may bring further softening. 

EM FX Outlook: Fed Easing Helps but Divergent Trends

September 26, 2024 8:00 AM UTC

  USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.  However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY).  Where inflation differentials are modest against the U.S., but

China Outlook: Unbalanced Growth and Slowing

September 24, 2024 8:54 AM UTC

      Growth is benefitting from momentum in public investment/exports and high tech production.  However, domestic demand is slower and this is a drag on H2 2024 and 2025 growth prospects.  Aside from the ongoing negative drag from the residential construction crisis, consumption is also softe

India CPI Review: India's Inflation Edges Up to 3.65% in August, Staying Below RBI Target

September 16, 2024 6:55 AM UTC

Bottom line: India’s August rose to 3.6% yr/yr, rising marginally from 3.53% y/y in July, reflecting higher food prices. Anticipate increased inflation over Q4, as festive demand drives up prices and the high base effects drop out of the equation. 

India CPI Review: Easing Prices, but Monsoon Risks Loom

September 10, 2024 9:14 AM UTC

Bottom line: India’s August inflation level is expected to trend down to 3.5% yr/yr, from 3.53% y/y in July, reflecting higher base effects. Interest rate cut is unlikely though as the RBI perceives this as a temporary reprieve. 

EM Markets Divergence with China Harder Landing Concerns

August 14, 2024 3:35 PM UTC

Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.  What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets

India CPI Review: Cooling Inflation - Will India’s RBI Shift Gears?

August 13, 2024 8:02 AM UTC

India's inflation cooled to 3.54% yr/yr in July, marking its lowest in nearly five years and slipping below the RBI's 4% target. With food prices driving the decline, the central bank may now consider a rate cut. However, future inflation risks remain amid uncertain monsoon patterns and global price

Indonesia Q2 GDP Review: Resilient Economic Activity

August 11, 2024 4:48 PM UTC

Bottom line: Indonesia's Q2 GDP growth is expected to ease to 5% yr/yr. While government consumption is expected to have remained stable, moderation in Indonesia's external sector will hold growth back. Additionally, with no longer the boost from festive demand, private consumption is also expected

Indonesia Q2 GDP Preview: Slight Easing After a Robust Start

August 4, 2024 8:00 PM UTC

Bottom line: Indonesia's Q2 GDP growth is expected to ease to 5% yr/yr. While government consumption is expected to have remained stable, moderation in Indonesia's external sector will hold growth back. Additionally, with no longer the boost from festive demand, private consumption is also expected

Inflation Heatwave: India's CPI and WPI Climb

July 15, 2024 6:35 PM UTC

India's inflation surged in June with wholesale prices hitting a 16-month high at 3.36% y/y, driven by soaring food costs. The CPI also rose to 5.1% y/y, reversing a five-month decline, prompting caution from the RBI, which anticipates inflation to ease as seasonal factors stabilise. Governor Shakti

India CPI Preview: Weather Disruptions to Propel Headline Inflation

July 11, 2024 7:49 AM UTC

Bottom line: India’s June inflation level is expected to trend up to 4.9% y/y, rising from 4.7% y/y in May, reflecting higher food prices. The persisting heatwaves and the advance of the monsoon and its impact on produce will weigh on food prices in the near term, which could potentially see price

EM After the Elections: Fiscal Focus and Inflation Questions

July 1, 2024 8:05 AM UTC

Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil.  India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip

Gold Rush: RBI Bolsters Reserves Amid Global Uncertainty

June 27, 2024 7:05 AM UTC

Despite a slight decline from its peak, India's reserves remain robust at US$ 652.8bn as of June 14. The RBI has followed a proactive approach in managing and diversifying these reserves, which now provide the central bank with sufficient room to stabilise the rupee amid recent volatility. It would

EMFX Outlook: USD Strength to Ebb with Different EM Impact

June 25, 2024 8:05 AM UTC

 We see Fed rate cuts from September starting to soften USD strength into year end and 2025.  Beneficiaries will include currencies with inflation moving towards target and high real rates or, alternatively, undervalued currencies. This should benefit the Brazilian Real (BRL) and Indonesian Rupiah

China Outlook: 2024 on Track, but 2025 Headwinds

June 19, 2024 9:35 AM UTC

Public investment and industrial production in high tech and renewables are helping to support growth and should get the economy close to 5% in 2024.  However, underneath the surface, consumption is slowing, private sector investment and employment growth is sluggish, and residential property inves

RBI’s Balanced Act: Steady Rates and a Promising FY25 Outlook

June 10, 2024 9:24 AM UTC

The Reserve Bank of India's Monetary Policy Committee, led by Governor Shaktikanta Das, chose to keep the repo rate unchanged at 6.5% for the seventh consecutive time, aiming to  ensure that the disinflationary process sustained. Growth is expected to be robust in FY25, while inflation risks are el

Indonesia Q4 GDP Review: Robust Start to 2024

May 7, 2024 1:22 PM UTC

Bottom line: Indonesia's Q1 GDP — released on May 6 — saw growth rebound to 5.1% yr/yr from 4.90% yr/yr in Q4 2023. While private consumption continued its ascent, government expenditure emerged as the key driver of Indonesia's growth narrative. Private consumption was supported by festive deman

EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Growth Gains But Inflation Pains: RBI's view on Indian Economy

April 29, 2024 12:42 PM UTC

Minutes of the latest Reserve Bank of India (RBI)'s monetary policy committee meeting revealed a nuanced outlook blending optimism regarding India's growth trajectory with apprehensions surrounding inflationary risks. While upbeat macroeconomic indicators paint a favourable picture, the committee re

China: Q1 Upside Surprise, but March Disappoints

April 16, 2024 8:33 AM UTC

Q1 GDP upside surprise was driven mainly by public sector investment.  With the government still to implement the Yuan 1trn of special sovereign bonds for infrastructure spending, public investment will likely remain a key driving force.  However, the breakdown of the March data show that retail s

India Inflation: Risks Tilted to the Upside

April 15, 2024 12:35 PM UTC

India's inflation trajectory in March 2024 showcased divergent trends in both consumer and wholesale price indices. While consumer inflation dipped to its lowest in ten months at 4.9% y/y, wholesale inflation rose to 0.5% y/y, driven by surging food prices. The outlook suggests gradual WPI escalatio

RBI Holds Rates Firm, Citing Room for Economic Growth

April 11, 2024 5:44 AM UTC

In line with our expectations, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) chose to maintain the policy repo rate at 6.5% in its latest meeting. The decision reflects their aim to gradually scale back stimulus measures while still supporting economic growth. It also unders

RBI to stand pat in April

April 4, 2024 7:25 AM UTC

The Reserve Bank of India (RBI) is gearing up to announce its first monetary policy decision for FY25 (April-March) on April 5. For the upcoming meeting, we anticipate that the RBI will likely keep the repo rate unchanged at 6.5%, given the optimistic outlook for economic growth and still elevated i

EM FX Outlook: Domestic Drivers Key

March 26, 2024 9:01 AM UTC

   In terms of spot EM FX projections domestic drivers remain critical, with a desire to avoid appreciation versus the USD for some countries.  Fed easing in H2 2024 should however help EMFX more broadly and allow some recovery in spot rates (e.g. Indonesian Rupiah (IDR), South African Rand (ZAR)

China Outlook: The Struggle to Hit 5% Growth

March 20, 2024 11:00 AM UTC

China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means some of the old engines of growth are not firing.  Some additional fiscal stimulus will likely

China: Unbalanced Growth

March 18, 2024 8:28 AM UTC

The February monthly data shows unbalanced growth.  Industrial production and public investment picked up, but retail sales slowed and residential property remains a negative drag on GDP.  While H1 GDP growth will be ok, it will likely slow in H2 and we still stick to a forecast of 4.4% for 2024 a

China: No PBOC MTF Cut and Protesting Low Government Bond Yields

March 15, 2024 8:51 AM UTC

Bottom Line: The PBOC decided not to cut the Medium-Term Facility (MTF) rate, but surprised by also withdrawing liquidity in what looks like a protest at the recent decline in government bond yields.  A 10bps MTF cut should still arrive in Q2, but later rather than sooner.  

China: Lunar New Year Boosts CPI, But Disinflation Still In Place

March 11, 2024 8:29 AM UTC

Bottom Line: February China CPI surged to +0.7% v -0.8% Yr/Yr due to three factors.  The late lunar New Year boosted CPI seasonally, while the good lunar New Year also boosted pork/food prices and travel prices.  The bounce is unlikely to be sustained and we see a fall back to 0.3-0.4% Yr/Yr in Ma

China: 5% 2024 Goal Tough with L Shaped Residential Property

March 5, 2024 9:43 AM UTC

Bottom Line: China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means the old engines of growth are not firing.  Some additionally fiscal stimulus will

Taiwan Speaker Reduces China/Taiwan War Risk

March 4, 2024 10:30 AM UTC

Bottom Line: Taiwan new speaker, Han Kuo Yu, has a willingness to open dialogue with China. This does not stop China likely undertaking large scale military exercises in the spring around Taiwan, as it still seeks to pressure the incoming DPP president.  However, we see the new Taiwan speaker elect

China: Authorities Views and Policy Changes

February 28, 2024 10:15 AM UTC

Bottom Line: China authorities leave the impression that further policy stimulus will likely be measured rather than aggressive.  We feel that they are not pessimistic enough on the medium-term hangover from the residential property sector and this is why we are downbeat on 2024 GDP growth and beyo

RBI Minutes Reveal a Cautious Committee

February 23, 2024 10:42 AM UTC

The Reserve Bank of India's (RBI) latest monetary policy decision, as reflected in the minutes of the February Monetary Policy Committee (MPC) meeting, presents a nuanced landscape of optimism about India's growth prospects, juxtaposed with concerns over inflation risks. The views of various MPC mem

Bank Indonesia indicates H2 easing

February 22, 2024 11:07 AM UTC

In a bid to support the stability of the Indonesian economy and the rupiah, Bank Indonesia (BI) has opted to keep its benchmark interest rate unchanged at 6% in its latest monetary policy committee decision today (February 21). This decision aligns with BI's commitment to balance economic growth whi

EMFX: Carry and Domestic Fundamentals Rather Than the USD

February 22, 2024 10:00 AM UTC

Bottom Line: Most major EMFX currencies have performed better than the Euro or the Japanese Yen against the USD in 2024 (Figure 1).  This is due to carry trades in Latam, but elsewhere reflects global equity love on Indian equities or domestic fundamentals.  This resilience for Brazilian Real/Indi

China: Yuan Outflow Fears Versus Net Exports

February 21, 2024 11:00 AM UTC

Despite a still overvalued Yuan, China authorities are reluctant to accept too much Yuan weakness for fear of causing domestic capital outflows and discontent with China’s government. At some stage, if GDP growth surprises on the downside, China authorities could decide that a controlled Yuan decl

China: 5yr LPR Cut But Not 1yr LPR

February 20, 2024 9:17 AM UTC

A larger than expected 25bps cut in the 5yr Loan Prime Rate (LPR) has been delivered, but the 1yr LPR rate was unchanged given that PBOC reluctance to cut the 1yr Medium-Term Facility rate (MTF) this month.  The 5yr LPR rate is not a game changer for residential property, as bigger policy moves are

China: 5% or 4.5-5.0% Growth Target

February 13, 2024 10:34 AM UTC

Though economics would argue for a 4.5-5.0% growth target for 2024, politics will likely mean that a 5% growth target is chosen in March.  With the residential property overhang, weak net exports with a shift of global supply chains and sluggish private sector business investment growth, this will

Reserve Bank of India Review: No Rate Cut On The Horizon

February 12, 2024 6:25 AM UTC

The Reserve Bank of India's Monetary Policy Committee, led by Governor Shaktikanta Das, chose to keep the repo rate unchanged at 6.5% for the sixth consecutive time, aiming to support ongoing economic recovery while ensuring a sustained decline in inflation. Despite signs of inflation moderation and

Reserve Bank of India Preview: No Rate Cut In Near Term

January 31, 2024 11:11 PM UTC

The RBI will keep the repo rate unchanged at 6.5% during the upcoming monetary policy committee meeting on February 8th. The current tight stance is expected to persist until at least mid-2024, as the central bank foresees inflation averaging 5.4% year-on-year in FY24, ending on March 31, 2024, befo

Climate Change: 2025-30 Rather than Long-Term Impacts

January 26, 2024 4:15 PM UTC

Bottom Line: In the 2half of the 2020’s GDP in DM economies will benefit from climate change investment, though the net positive impact will likely be modest on an annual basis. The impact on EM economies will be more mixed, as lack of fiscal space restrains the scale of green investment and some

China: GDP 5.2% for 2023, but 2024 To Struggle

January 17, 2024 9:24 AM UTC

Quarterly GDP is interesting and came in at 1.0% after the 1.3% quarterly gain in Q3.  The trend in quarterly GDP (Figure 1) is also not consistent with 5% growth and the Yr/Yr will dip in Q1 2024 when the large gain in Q1 2023 drops out (due to the end of zero COVID policies).  We maintain the 4.