Published: Sat, February 09, 2019
Markets | By Otis Pena

RBI cuts inflation forecast to 2.8% for Q419

RBI cuts inflation forecast to 2.8% for Q419

India's new central bank chief delivered an unexpected interest rate cut, providing Prime Minister Narendra Modi with the kind of stimulus he needs to stoke economic growth in an election year.

Its shock downgrade compares with 1.7 per cent predicted in November, while the Bank also cut its outlook for 2020 to 1.5 per cent.

Mr Carney cautioned that the "fog" of Brexit was increasing the chances of recession, particularly if the United Kingdom crashes out of the European Union without a deal.

Sterling initially fell a quarter of a cent against the dollar, touching a two-week low, but was up on the day after Carney told reporters of the probability of an economic pick-up after a Brexit deal that would usher in a rate hike.

The Bank slashed this year's growth forecast to 1.2 per cent - the lowest since 2009, when the economy contracted by 4.2 per cent at the height of the recession following the financial crisis.

"Taking into consideration these developments and assuming a normal monsoon in 2019, the path of CPI inflation is revised downwards to 2.8 per cent in Q4:2018-19, 3.2-3.4 per cent in H1:2019-20 and 3.9 per cent in Q3:2019-20, with risks broadly balanced around the central trajectory", RBI said.

The BOE is the latest central bank to take a downbeat turn this year, after recent dovish statements from the U.S. Federal Reserve and European Central Bank.

Business and farm leaders said they were also sceptical about the impact of the rate cut - and said it was the inability to borrow that was the biggest problem. United Kingdom officials noted the impact of China's slowdown and said trade wasn't contributing as much to growth as they expected.

China still General Motors' biggest market
In the same vein, SSgA Funds Management Inc increased its Square, Inc. shares by during the most recent reported quarter. General Motors Company (NYSE:GM) has an ABR of 1.64 which is the combined stock view of 11 analysts poll results.

The BoE said on Thursday a survey it conducted of more than 200 businesses showed that half had begun to prepare for a no-deal Brexit, something a majority expected would cause the economy to shrink and unemployment to rise.

The BoE saw a fall this year in business investment and housebuilding, which have been weak in the run-up to Brexit, as well as a halving of the growth rate in exports, reflecting the global slowdown.

Officials said that potential supply growth is now a "little below" the 1.5 per cent previously estimated.

But it said the growth hit was expected to be short-lived, with a recovery in expansion later in 2019 - though this is based on a Brexit deal being reached by March 29. The economy could grow by around 0.5 percentage point more over the coming three years.

"Given core-inflation is already quite high, we see headline inflation rising sharply towards the end of the year".

Carney denied the February inflation report was a move away from its plan for "gradual and limited" interest rate hikes in the future.

It forecasts inflation - now at 2.1% - will fall below its 2% target for much of 2019, before picking up again due to domestic pressures, such as wage growth.

Like this: