CHART OF THE WEEK 📈
The RBI surprised markets with its unscheduled rate hike announcement. There has been a polarised change in its approach from being pro-growth to controlling inflation. The unscheduled announcement just exhibits the urgency with which it had to move and tack action.
But to be honest, inflation data, globally, and not only in India has been enough of an indicator for the rate hike. It should have been no surprise that rates were increased by 40 bps.
A few central banks acted last week:
🇮🇳 India - Increased rates by 40 bps. Although the rate increase shouldn’t have been a surprise, the timing definitely was.
🇺🇸 USA - Fed increased rates by 50 bps. It is the largest hike since 2000, and the second consecutive rate hike for the first time since 2016. But then inflation is at a 40-year high, at 8.5% compared to the Fed’s target of 2%. Rate hikes though are just one, what will contribute to the cooling off is offloading its heavy US$ 9 trillion balance sheet, which it intends to begin in June.
🇬🇧 UK - The Bank of England increased rates to 1% from 0.75%. It also warned of the economy shrinking under pressure from double-digit inflation. It predicts inflation to climb to 10% by October.