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India's retail inflation is projected to surge to 6.15% in October, exceeding the Reserve Bank of India's (RBI) tolerance threshold of 6%, according to a new report by Union Bank of India. The spike is attributed to persistent <keyword id="21013592" type="General" weightage="20" keywordseo="food-price-pressures" source="keywords">food price pressures</keyword> and the waning of favorable base effects from the previous year. Earlier this month, RBI governor Shaktikanta Das also echoed similar sentiments and noted that the inflation print for October 2024 could stay well above 5.5%. This is why, as Das highlighted, cutting interest rates as early as December would be very early and premature The <keyword id="19999655" type="General" weightage="20" keywordseo="Consumer-Price-Index" source="keywords">Consumer Price Index</keyword> (CPI) data for October, which will be released at 4 pm on Tuesday, as opposed to the previous practice of releasing this data at 5:30 pm on the 12th of every month, follows September's inflation reading of 5.49%, up from 3.65% in August 2024. The last time inflation breached the RBI's upper limit was in August 2023. Despite the RBI's anticipation of an October inflation "hump," the Union Bank report suggests that the magnitude of the increase might raise concerns, particularly as November's figures are also tracking at elevated levels. The bank maintains its forecast of unchanged interest rates in December's monetary policy meeting, with a modest 50 basis points rate cut cycle predicted to begin in February 2025. Food inflation remains a key driver of price pressures, with vegetables and edible oils leading the recent surge. In September 2024, India's YoY food inflation rate hit 9.24%, up from 5.66% in the month prior. However, the report projects some easing of food inflation in the January-March quarter, citing typical winter price moderation and improving prospects for rabi crops. Despite this, potential risks from food supply disruptions, imported edible oil prices, and the impact of potential trade tariff hikes will exist. The RBI, which aims to maintain retail inflation at 4%, has held the repo rate steady at 6.5% for the tenth consecutive time in its last meeting as part of its inflation containment strategy. A recent SBI report also noted that expecting rate cuts in this quarter would be immature, and easing was possible only during the first half of 2025. "Given the current estimates of FY25 real GDP growth at 7.2% and CPI at 4.50%, the RBI would quite possibly keep policy rates stable over the coming quarter at least. Emerging trends in the growth outlook would possibly determine the timing and extent of any policy easing. With near-term CPI numbers likely to stay elevated, it’s premature to consider expectations of any easing in the December review. "However, high-frequency data do validate a softness in growth data on an incremental basis. Given the anticipated aligning of CPI closer to the target over H2, a shallow easing, if any can be a reasonable possibility over H1 of CY 25", it added.

Retail inflation expected to breach 6% mark in October, says UBI Report

Days after Trump won his way to the White House, becoming the 47th President of the United States, the US Federal Reserve slashed the interest rates by 25 basis points, bringing them within the range of 4.5-4.75%. This is the second time this year that the Fed has lowered the interest rates, after cutting them down by 50 basis points in September 2024. u Fed chair Jerome Powell noted that monetary policy remains tight as inflation remains elevated at 2.4% as of September 2024, slightly above the 2% mark set by the commission. However, the Fed remained optimistic about the current state of the economy. "The Committee seeks to achieve maximum employment and inflation at 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the FOMC (Federal Open Market Committee) noted in its press release. The rate cut was along widely anticipated lines, although experts were wary of the Fed's way ahead, given that Donald Trump has been elected as the US President. In the past, he has, on multiple occasions, expressed his desire to yield greater influence on the Fed, apart from publicly criticizing Powell. However, Powell continued to stand his ground, noting that Trump cannot legally sack him. He believed in keeping the Fed independent, at least until his tenure as governor ends in 2028. He highlighted that even if he is explicitly asked by Trump to quit, he won't do so. <h2>Trump's regime to inch up inflation?</h2> Trump's electoral promises, if translated into policies, could spell disaster for the Fed's effort to curtail inflation. Reportedly, Trump has promised to levy aggressive tariffs against US trading partners, particularly China, and even extend his 2017 tax cuts. This could mean higher levels of the federal deficit, which would push up prices, wages, and hence, inflation, even as the Fed tries to consistently bring it under control. Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities, notes that it wasn't a surprise when the US Fed cut interest rates by 25 basis points (bps) to 4.75%. The Fed had given enough clues, and the market too had anticipated these rate cuts. "However, what was surprising was how the <keyword id="23863852" type="General" weightage="20" keywordseo="US-10-year-bond-yields" source="keywords">US 10-year bond yields</keyword> moved over the last one and a half months, which have been rising relentlessly from 3.6% to almost 4.5% despite the 50 bps cut in the last Fed meeting. It seems that the market is anticipating slower rate cuts going ahead, and maybe there are even chances of inflation rising. The bond yields have cooled off and slipped below the 4.335% mark. This should be bullish for emerging markets like India," he added.

US Fed cuts interest rates by 25 bps, Powell notes Trump's victory to have no impact on policy decisions

<ul class="summary-list"><li>President-elect Donald Trump said he would implement tariffs on imported goods.</li><li>Economists said the proposals could boost inflation and raise prices for consumers.</li></ul>One of the first policies President-elect <a target="_blank" class="" href="https://www.businessinsider.com/election-results-trump-harris-presidential-election-2024-11">Donald Trump</a> is expected to enact after being sworn into office is imposing <a target="_blank" class="" href="https://www.businessinsider.com/cost-expensive-goods-price-impact-presidential-election-scenarios-trump-harris-2024-10#imported-goods">taxes on imported goods</a>.Many economists say these tariffs, as well as some of his other proposals, could kick-start another bout of inflation and interest-rate hikes.Trump has said that his proposals would not impact US prices. "I am going to put tariffs on other countries coming into our country, and that has nothing to do with taxes to us. That is a tax on another country," he said in an August speech.Some experts have argued <a target="_blank" class="" href="https://www.businessinsider.com/trump-tax-plan-tarriffs-benefits-top-earners-study-2024-10">otherwise</a>. Economists and investors project that taxes imposed on imports will be passed on to American consumers in the form of higher prices. In an economic chain reaction, households would then pay higher interest rates on borrowing of all kinds as the Fed moves to tame that newly rekindled inflation.<h2 id="28eee089-e5e3-42d1-bc61-18122840af26">Ramping up tariffs from Trump's first term is expected to eat into Americans' wallets</h2>On the campaign trail, one of Trump's cornerstone proposals was a 60% <a target="_blank" class="" href="https://www.businessinsider.com/where-does-trump-vance-stand-on-china-tariffs-inflation-taxes-2024-7">tariff</a> on goods imported from China and a 10% to 20% tariff on imports from other countries.The US Census Bureau reported that broad tariffs would likely affect the prices of automobiles, drugs for human and veterinary use, food and beverages, furniture, and household appliances.Trump could announce these changes as soon as he takes office because they would not require congressional approval, but because implementation could take time, consumers would not see higher prices immediately.An <a target="_blank" class="" href="https://www.piie.com/sites/default/files/2024-09/wp24-20.pdf">analysis</a> from the nonpartisan Peterson Institute examined Trump's proposed 60% tariff on goods imported from China and estimated that it would boost inflation by 0.4 percentage points in 2025. The estimate does not include Trump's proposal for a 10% to 20% tariff on other imports.Markets are also <a target="_blank" class="" href="https://markets.businessinsider.com/news/bonds/surging-treasury-yields-after-trump-win-show-borrowers-may-not-get-relief-2024-11">expecting higher inflation</a> under Trump; bond yields surged following Trump's victory. That led to the 30-year fixed mortgage rate rising, meaning homebuyers are on track to see higher interest rates on loans.An <a target="_blank" class="" href="https://taxpolicycenter.org/taxvox/tpc-trump-tariffs-would-raise-household-taxes-and-slow-imports">analysis</a> by the nonpartisan Tax Policy Center found that Trump's policies would decrease posttax incomes by an average of $1,800 in 2025. A separate <a target="_blank" class="" href="https://www.americanprogressaction.org/article/trumps-tariff-would-cost-the-typical-american-household-roughly-1500-each-year/">analysis</a> by the left-leaning Center for American Progress said that his tariff plans could cost the typical American household an extra $1,500 a year.Tariffs are typically used to raise government revenue and bolster domestic manufacturing. Trump enacted them in his first term as part of his "America First" policies, including a 25% tariff on Chinese goods that ultimately <a target="_blank" rel="" class="" href="https://www.businessinsider.com/trump-tariff-trade-war-risk-china-exports-great-depression-economy-2024-5">led to a trade war</a> between the two economies. While they did not significantly impact inflation, they did raise taxes for consumers. The Tax Foundation <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://www.businessinsider.com/where-does-trump-vance-stand-on-china-tariffs-inflation-taxes-2024-7">estimated</a> that Trump's tariffs during his first term amounted to a nearly $80 billion tax increase on Americans buying Chinese imports.Trump's win is also expected to influence the Federal Reserve's upcoming decisions on interest rates. While it's too soon for the Fed to make any adjustments since Trump has not yet implemented any tariffs, members of the Federal Open Market Committee will likely begin discussing how Trump's future economic policies could affect consumers — including whether the central bank would need to hike interest rates in the future in response to inflationary pressure.The Fed is expected to <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-federal-reserve-election-jerome-powell-inflation-jobs-2024-11">cut interest rates by 25 basis points</a> on Thursday, and Fed chair Jerome Powell will likely offer some insight into the Fed's direction following Trump's victory.However, the future of the Federal Reserve <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cut-trump-fed-powell-reaction-independence-history-2024-9">is uncertain under Trump</a>. The president-elect has previously suggested that he would like to have a say over interest-rate decisions, something presidents do not currently have. This raises the question of whether the central bank would continue to remain politically independent.Americans will likely learn more about what to expect from Trump as the year comes to a close. While Trump has maintained that his policies will help the economy and leave Americans better off, the Nobel Prize-winning economist Joseph Stiglitz <a target="_blank" class="" href="https://www.businessinsider.com/trump-presidency-policies-inflation-economy-americans-joseph-stiglitz-letter-2024-6">previously told Business Insider</a> that the "general consensus" among experts is that "the Trump administration would be more inflationary.""The broad assessment of the consequences of that is that the Fed would be forced to raise interest rates, and all that combined would still serve to increase inflation even as unemployment increased and GDP slowed," he said.

Get ready for inflation and interest rates to rise again

Global markets are looking ahead to the US Fed's meeting scheduled for Thursday, November 7, 2024, expecting the Jerome Powell-chaired FOMC (Federal Open Market Committee) to slash interest rates further by 0.25%. In September this year, the Fed surprised the markets by cutting interest rates by a massive 0.5%, for the first time in 4 years. As per the <keyword id="23807624" type="General" weightage="20" keywordseo="CME-Fed-Watch-Tool" source="keywords">CME Fed Watch Tool</keyword>, there is now a 99.5% chance that the Fed will reduce the interest rates by around 25 basis points, bringing it within the range of 4.5% to 4.75%. Only 0.5% believe that the Fed might leave the rates unchanged, within their present range of 4.75% to 5%. As for the Fed's December meeting, scheduled for December 18, per the CME Fed Watch tool, 79.5% believe that interest rates would be in the range of 4.25% to 4.5%. Another 20.4% believe that yields will remain in the range of 4.5% and 4.75%. Only 0.1% see the interest rates staying within their current range of 4.75% to 5% <h2>No major changes anticipated</h2>However, it is unlikely that this quarter-point rate cut would bring about any significant financial changes in the US economy. The Fed is again expected to bring down the interest rates by another 25 basis points in their December meeting. This would imply a total rate cut of about 50 basis points by the end of this year. So, why is the Fed not bringing down interest rates by 50 basis points in one fell swoop this time around? Why wait till December to bring down the rates by another 25 basis points? Experts believe that it could stoke inflation, which has seen a sharp decline in the recent past. A steep slash of borrowing rates could accelerate borrowing activity and inject significant cash into the economy at once, pushing up inflation. Per the Fed's recent projections, a total of 4 rate cuts are anticipated in 2025. On a YoY basis, inflation in the US dipped to 2.4%, close to the Fed's target of 2%. With inflationary pressures reined in, the economy growing at the rate of 2.8% during the third quarter of FY24, and the unemployment rate down to 4.1%, the markets see much merit in bringing interest rates down. This is especially important to boost spending, particularly in sectors such as housing and automobiles, where even a slight tinkering in interest rates can drastically impact the amount and volume of loans taken to own them. Data suggests that during Trump's presidency tenure, i.e., between 2017 and 2021, inflation averaged at a rate of 1.9% a year. During the Biden administration, where Kamala Harris served as VP, the inflation is on track to average around 5% a year. Shrisha Acharya, Vice President, Anand Rathi Global Finance, also notes that the results of the impending US elections, which are likely to be declared tomorrow, will impact the yields and stock markets. "The Trump card, coupled with potential Republican control, could mean higher bond yields due to anticipated increases in deficit spending, inflation risks, and potential tax cuts. This could very well jiggle the confidence in U.S. Treasury bonds and thus start a chain effect that will possibly impact global market stability and lead to short-term volatility. On the other hand, Harris’ rise has been met with a stock market rally glued on expectations of economic stability and controlled inflation, with more predictable fiscal policy likely to help in a soft landing," he explains.

What can you expect from the US Fed meeting later this week? Here's all you need to know

Economists at the country's largest lender, SBI, today said they see India's Q2 real GDP growth slowing down further to 6.5% in the September quarter of this fiscal year. Amid concerns over the country's economic growth rate and whether it is slowing down, the analysts said they expect FY25 growth to come "closer to" 7%. SBI analysts join a long line of agencies like Fitch, ADB, IMF, Moody, World Bank, S&amp;P, and even RBI in forecasting India's GDP growth for FY25 in the range of 6.8% to 7.2% for FY25, driven by robust consumption and investment. SIP inflows have been at an all-time high, and so has QIP (qualified institutional placement) fundraising. As many as 71 companies raised Rs 88,678 crore this year through QIPs. Activity in Indian primary markets also remained robust, with 78 mainboard IPOs in 2024; this is a 111% rise from just 38 listings in FY23. Between April and June 2024, India's real GDP grew by 6.7%, the lowest growth seen in 15 quarters, pushing experts to believe that India is caught in a cycle of slowdown. "There is some incipient pressure evident on the domestic economy. Based on our analysis of 50 meaningful leading indicators (both consumption and demand-centric), a dip looks plausible across select cohorts of agriculture, industry, and services in Q2," the <keyword id="22337294" type="General" weightage="20" keywordseo="SBI-economists" source="keywords">SBI economists</keyword> added. Stating that they track 50 indicators to gauge economic activity, SBIs note said the proportion of indicators showing acceleration declined to 69% in Q2 FY25, as against 80% in Q2 FY24 and 78% in Q1 FY25. However, things might be changing now, given that rural demand has started looking up amidst muted urban demand. SBI also explained that the ongoing regulatory tightening on unsecured lending and roadblocks that are hindering rollover/refinancing of debt through unsecured credit are dismantling the unwarranted exuberance that had built up post-pandemic, especially in the urban areas. Madhu Lunawat, CIO &amp; Fund Manager, Bharat Value Fund states that the overall investment environment remains strong due to favorable economic conditions supporting government policies &amp; reforms. "The sustainable inflow from domestic investors is going to support the Indian equity market in any kind of correction. The long-term bullish structure of Indian economy will continue to attract new domestic &amp; global investors to participate in India’s growth story through various Investment avenues.” <h2>Rate cuts not on cards</h2>RBI Governor Shaktikanta Das clarified today that changing the monetary policy stance to 'neutral' does not mean a rate cut is imminent in the central bank's next policy announcement. Notably, RBI MPC is set to meet between December 4 and 6, 2024, to decide if the prevailing repo rate of 6.5%, which has stayed unchanged for the last 2 years, should be brought down or not. In its last meeting, The <keyword id="20501100" type="General" weightage="20" keywordseo="RBI-monetary-policy" source="keywords">RBI monetary policy</keyword> committee had shifted its stance to 'neutral' indicating that it is open to adjusting interest rates based on economic conditions. "It should not be assumed that we have done this, so therefore the next step is a rate cut. A change in stance doesn't mean that the next step is a rate cut in the very next meeting. It's not so," Das said. Das also cautioned that inflation remains a key factor, and inflation and CPI prints for October are expected to stay high.

SBI economists see Q2 GDP growth slowing down to 6.5%; FY25 growth to be closer to 7%

<div type="image" title="In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit" msid="114284206" hostid="261" caption="&amp;lt;p&amp;gt;In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit&amp;lt;/p&amp;gt;"></div> On September 18, 2024, the <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="20" keywordseo="Home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value. </li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value. </li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, <keyword id="173069" type="General" weightage="20" keywordseo="Home-loan-interest" source="Orion">home loan interest</keyword> rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

<ul class="summary-list"><li>Expect a re-acceleration of inflation for the rest of 2024 into 2025, says Michael Landsberg.</li><li>High shipping rates and daily living expenses indicate that inflation could be worse than expected.</li></ul>A few months ago, it seemed like the war on <a target="_blank" href="https://www.businessinsider.com/higher-long-term-inflation-outlook-investing-strategy-attractive-bonds-stocks-2024-10">inflation</a> had been won.Wall Street strategists were expecting inflation to continue cooling down into 2025, clearing the way for a series of consistent rate cuts as the Federal Reserve insisted price increases were no longer a threat. In September, the Consumer Price Index (CPI) showed that prices rose 2.4% from last year — closing in on the Federal Reserve's target of 2%.Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, wasn't so sure. He saw signs in the market pointing to a re-acceleration of inflation in the last few months of 2024 and into 2025.Now, it seems like Landsberg may be right. After a Trump victory, concerns about inflation are creeping up again as proposed policies such as <a target="_blank" href="https://www.businessinsider.com/trump-tariffs-hit-company-stock-profits-hardest-china-investing-manufacturing-2024-11">tariffs</a> could push prices up. And as the October CPI report showed, inflation is back on the rise, with prices increasing 2.6% year-over-year. In an interview with Business Insider, Landsberg shared the economic indicators he's watching to monitor inflation and the best way to prepare your portfolio in case of another flare up.<h2 id="7dc40d47-f3ee-4de6-bd68-d838e6c9299f">'Higher for longer'</h2>Inflation could rise to 3% as early as January and hit a mid-3% level in 2025, making it difficult for the Federal Reserve to continue its rate-cutting cycle, in Landsburg's view. He's expecting the Fed to pause rate cuts in December.Landsberg believes the Bureau of Labor Statistics' metrics aren't providing the full inflation picture. He's keeping his eye out on other economic indicators that provide a more on-the-ground look at inflation levels.First, rising Chinese shipping rates are a telling sign of inflation. China is one of the US' biggest trading partners, so an increase in transportation costs between the two countries will likely trickle down and reflect in consumer prices.Geopolitical conflicts in the Red Sea are contributing to the price increases, as shipping companies are forced to detour and choose longer and more expensive routes, according to Landsberg.With <a target="_blank" href="https://www.businessinsider.com/inflation-fed-rate-cuts-red-sea-attacks-panama-canal-shipping-2024-1">12% of global trade</a> passing through the Suez Canal, the Red Sea region is a critical trade route for consumer basics such as oil, cars, raw materials, and electronic components. As a result, these blockades are putting pressure on global supply chains and shipping costs.<div type="image" title="Shanghai Containerized Freight Index" height="663" width="1185" msid="115308890" hostid="261" sizebytes="33696"></div>The Shanghai Containerized Freight Index, which tracks the current spot freight rates for containerized cargo departing from Shanghai, China, has remained elevated in 2024 after spiking earlier this year due to the continued blockade of the Red Sea by Houthi rebels."Shipping costs don't affect margins of companies as much as they're going to affect people's wallets, and that's not getting looked at," Landsberg said.Landsberg also points to the high prices of commodities and everyday necessities. Food prices and rents are still rising. In some East Coast metro areas, rents have risen over double digits since last year, according to <a target="_blank" class="" href="https://www.redfin.com/news/rental-tracker-october-2024/">Redfin</a>.Insurance prices are another strong indicator of inflation, whether it be for cars or <a target="_blank" href="https://www.businessinsider.com/states-most-at-risk-climate-change-rising-home-insurance-premiums-2024-10">homes</a>."Inflation in insurance, which everyone has to have all the time, is up double digits year-over-year," Landsberg said. "That affects people's wallets certainly more than just a printed CPI number."That's not to mention the potential of wage inflation. According to October's employment report, hourly wage growth was up 4% from this time last year. If Trump clamps down on immigration, then that number could go even higher as the supply of workers falls, pushing up the cost of labor.<h2 id="102f3015-2817-4d7e-8b5c-6ea2e030d247">Rebalance your portfolio</h2>Diversification is key in an inflationary environment by spreading out risk between sectors and asset classes, but you might be less diversified that you think, according to Landsberg.One mistake that Landsberg sees investors making is doubling down too much on a specific investment theme. Investors bullish on AI may have devised creative ways to play the AI trade outside of the technology sector, such as buying data center real estate investment trusts and utility stocks. This can give them a false sense of security in their portfolio, as it seems like they're exposed to multiple different sectors.However, if all of your investments across sectors are based on the AI theme, you won't experience much derisking.Landsberg points to the market selloff in August this year, where utilities and real estate indices fared better than technology, but individual real estate and utilities stocks with significant exposure to data centers didn't perform so well."I tell people now that we need to be diversified on themes, not just on sectors," Landsberg said. Some other secular growth themes that Landsberg believes will drive stocks include an aging population, cybersecurity, and alternative energy.In addition to making sure you're sufficiently diversified, there are some other steps that you can take to protect your portfolio from inflation. Landsberg identified a few inflation-benefitting trades such as energy, financials, and <a target="_blank" href="https://www.businessinsider.com/how-to-invest-in-gold-price-record-highs-safe-haven-2024-10">gold</a>.Some funds that provide exposure to these sectors include the Energy Select Sector SPDR Fund (<a target="_blank" href="https://markets.businessinsider.com/etfs/the-energy-select-sector-spdr-fund-us81369y5069?miRedirects=1">XLE</a>), the iShares US Financials ETF (<a target="_blank" href="https://markets.businessinsider.com/etfs/ishares-us-financials-etf-us4642877884?miRedirects=1">IYF</a>), and the Goldman Sachs Physical Gold ETF (<a target="_blank" href="https://markets.businessinsider.com/etfs/goldman-sachs-physical-gold-etf-us38150k1034?miRedirects=1">AAAU</a>)As the end of the year draws near, Landsberg recommends taking a look at your portfolio and rebalancing some positions. If you're overexposed to technology and AI, now is a good time to put money in more inflation-resistant areas.Ultimately, make sure you're investing in high-quality companies with a robust financial profile, he said."You need to have a portion of your portfolio that will do well if inflation starts to move back higher," Landsberg said. "You want companies with pricing power, companies with earnings growth."

Here's how to rebalance your portfolio as these economic indicators flash 'higher for longer' inflation and rates

Earlier today, RBIs MPC (Monetary Policy Committee) decided to leave the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5%, while changing the policy stance toward neutral. The aim, as <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> maintained, was to strike a balance between taming domestic <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> and maintaining target growth. A neutral stance gives the RBI the flexibility to adjust <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> based on the direction of inflation, as opposed to its previous stand of withdrawing accommodation, which eliminates any possibility of rate cuts. While a change of stance doesn’t necessarily mean a cut should follow, most experts view this as a prelude to a possible rate cut in December this year, or even February next year. Says Deepak Ramaraju, Senior Fund Manager, Shriram AMC, "The RBI stance has changed to neutral, indicating that its primary focus is to balance growth and inflation. Growth has been resilient and given the short-term pressure on inflation, RBI may continue to hold interest rates unchanged in Q3 FY 2025. Based on inflation moderating below 4.5% and course of geo-political concerns, the RBI may undertake a rate cut decision in Q4 FY 2025". So, what does this mean for your investments? How will this decision impact your existing funds? We take a look. <h2>Good time to invest in high-yield deposits</h2>This is a good time to invest in high-yield <keyword id="19975805" type="General" weightage="20" keywordseo="fixed-deposits" source="keywords">fixed deposits</keyword> and long-term bonds. That's because with rate cuts imminent in the upcoming quarters, you'd be able to lock-in your funds with the prevailing, relatively higher interest rate right now. As for the yellow metal or gold, it is generally considered a safe haven asset during turbulent market times. That's why you should consider making it a part of your investments, or increasing its weightage in your overall portfolio, depending on your needs. Vijay Kuppa, CEO, InCred Money highlights that with deposit rates at elevated levels, one has an ideal opportunity for locking in high-yield fixed deposits."At the same time, high borrowing costs also make a compelling case for increasing debt allocations in investment portfolios, which offer a buffer against potential equity market corrections, which might occur due to <keyword id="19955176" type="General" weightage="20" keywordseo="geopolitical-tensions" source="keywords">geopolitical tensions</keyword>", he continues. With the chronic crisis in Middle-East flaring up again, as Israel looks to target Lebanon and Iran, you can expect some volatility and downturns in the <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword>, both in India and globally, in the times to come. Over the last 5 days, Sensex has dipped by over 1,900 points, or about 2.38%, and Nifty has also gone down by 2.23%. With this set to continue for some time, you can reconsider and evaluate your investments in debt. Mahendra Kumar Jajoo, CIO – Fixed Income, Mirae Asset Investment Managers (India) explains that the market is confident of a rate cut in the times to come, and that the <keyword id="20066775" type="General" weightage="20" keywordseo="bond-market" source="keywords">bond market</keyword> has already started pricing in the same. "We have already seen some of this already, with 10Y GOI yields at around 6.75%, having already eased significantly in last few months. So, if investors wait for rate cut to invest, it may be too late for them. Also, with corporate credit picking up, investing in corporate bond funds for a period of 3-5 years can also serve the investor well. Investors having a long term investment horizon and appropriate risk appetite can also invest in gilt funds", he continues. <h2>Dont exit the markets yet </h2>Though short-term biases of FII may continue towards Chinese markets keeping pressure on the equity markets, the resilient domestic flows can defy deep corrections in the equity markets despite high valuations. The markets may trend positive with subsequent rate cuts by the US Fed later this year. Hence, it wont be advisable to completely exit the equity markets during these times, notes Avnish Jain, Head - Fixed Income, Canara Robeco Mutual Fund Jain advises to take a buy on dips approach towards the stock markets i.e. adding quality stocks to your portfolio during times of market downturn. Shrikant Chouhan, Head Equity Research, Kotak Securities says that the current market texture is volatile, hence level based trading would be the ideal strategy for the day traders. "For the bulls now, 25,050/81,700 would be the key level to watch out. Above the same market could retest the level of 25,200-25,225/82,000-82,300. On the flip side, 24,900/81,200 would be the key support zone for the traders. Below the same, the selling pressure is likely to accelerate. Below the same, market could slip till 24,800-24,780/81,000-80,700", explains Chouhan. <h2>Time to buy a home? Maybe! </h2>No rate cut can spell some good news for homebuyers who are looking to get their hands on real estate during the festive season. Even as home loan rates remain steady as of now, homebuyers may have to wait until December or beyond to get any tangible relief in their home loan EMIs. Vimal Nadar, Head of Research, Colliers India explains that a change in stance from “withdrawal of accommodation” to “neutral” indicates its clear direction for a possible reduction in interest rates in the foreseeable future. This ongoing stability in repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady. "Typically, Q4, marked by higher inclination of homebuyers to wrap-up property purchases during the auspicious period combined with instantaneous liquidity benefit aided by developers offering attractive discounts, has historically provided the final push to housing sales across the major markets in the country", he added.

RBI leaves repo rate unchanged. What does this mean for you?

<ul class="summary-list"><li>This post originally appeared in the Insider Today newsletter.</li></ul>Happy Friday! Elections can be stressful, so take some tips from new research on how to lower your blood pressure. <a target="_blank" href="https://www.businessinsider.com/lower-your-blood-pressure-5-minutes-exercise-a-day-study-2024-11">Daily short, intense workouts</a> can be your best bet to fight disease and improve longevity.In today's big story, the Fed <a target="_blank" href="https://www.businessinsider.com/federal-reserve-cuts-interest-rates-quarter-point-powell-inflation-election-2024-11">cutting interest rates yesterday was never really in doubt</a>. What comes next isn't as clear.What's on deck:<ul><li>Markets: Goldman Sachs announced <a target="_blank" href="https://www.businessinsider.com/goldman-sachs-partners-revealed-see-full-list-names-diversity-women-2024-11">its newest class of partners</a>.</li><li>Tech: The stock market is already indicating <a target="_blank" rel="noopener" href="https://www.businessinsider.com/big-tech-winners-losers-trump-election-win-according-to-market-2024-11">winners and losers among Big Tech</a>.</li><li>Business: Hiring experts are predicting <a target="_blank" href="https://www.businessinsider.com/trump-win-affect-job-hiring-trends-and-employer-confidence-2024-11">a "Trump bump" for the jobs market</a>.</li></ul>But first, more relief … for now.If this was forwarded to you, <a target="_blank" href="https://www.businessinsider.com/subscription/newsletter/insider-today">sign up here.</a><h3 id="7fa5f018-5b05-4a37-a8dc-d3f89138bcb3">The big story</h3><h2 id="5fd547b9-ec52-41fc-8e08-4f4b27dd8097">The Fed's new conundrum</h2><div type="image" title="Jerome Powell on top of stock market chart going down." height="900" width="1800" msid="115090330" hostid="261" sizebytes="70080"></div>Americans got a bit more relief from the Fed, but questions are swirling about what the president-elect means for future plans.The Federal Reserve <a target="_blank" href="https://www.businessinsider.com/federal-reserve-cuts-interest-rates-quarter-point-powell-inflation-election-2024-11">cut interest rates by 25 basis points Thursday</a>, its second-straight reduction since September in a move that was largely expected. Additional rate cuts aren't as clear, though, as Donald Trump's proposed widespread tariffs <a target="_blank" href="https://www.businessinsider.com/trump-inflation-interest-rates-fed-rate-cuts-fomc-meeting-outlook-2024-11">could slow down the Fed's plans</a>.Economists have said Trump's 10-20% blanket tariff on most imported goods will cause inflation to flare up as producers and importers pass the cost of the tax onto consumers. Prior to the election, Nobel economist Paul Krugman said Trump's tariff plans would result in an "inflationary shock that is bigger than almost anything else you could do through federal policy."It's not just speculation from economists. The market is indicating inflation could lead the Fed to keep borrowing rates high. Treasury yields soared the day after the election, a sign Wall Street sees interest rates staying elevated.Interest-rate traders have also recalibrated their expectations. The chances of a 25-point December rate cut went from 83% at the start of the month down to as much as 63% yesterday following the Fed's announcement, according to the CME FedWatch tool. (It currently stands around 75%.)<div type="image" title="Photo of Donald Trump" height="1279" width="1920" msid="115090327" hostid="261" sizebytes="95086"></div>Still, speculating on what could come from a president-elect is a tricky game.Greg McBride, chief financial analyst at <a target="_blank" href="http://Bankrate.com">Bankrate.com</a>, told Insider Today that Fed Chair Jerome Powell didn't indicate a pause in cuts was coming in December during Thursday's press conference. Powell also emphasized the election won't impact the central bank's near-term actions, McBride added."Until there are policy specifics being passed into law, there is nothing for the Fed to put in their economic models and they won't speculate or assume anything in the interim," McBride wrote via email.There's also the question of whether Trump's tariff would be as inflationary as some fear. During his first term, the former president issued tariffs against China that didn't cause prices to spike.Trump's proposals this time around are much more aggressive, but it's not clear what will actually be put in place."Nobody knows what will be implemented and what is just posturing for negotiation," McBride added.Dominique Lapointe, director of macro strategy for Manulife Investment Management, told Insider Today via email the firm's base case is still a 25-point cut in December. The Fed would change course in reaction to tariffs only if they are official and making an impact, meaning the central bank's policy likely wouldn't change until mid-2025, Lapointe added.One thing that is clear: <a target="_blank" href="https://www.businessinsider.com/powell-wont-resign-federal-reserve-step-down-trump-election-2024-11">Powell's not leaving</a>.When a reporter asked the Fed leader if he would resign if Trump, who has been critical of him, asked him to step down, his response was simple: "No."<h3 id="77f31a4c-8462-4e3d-a71f-838cb79493fb">News brief</h3><h2 id="1fcd294b-3f53-425f-9f20-4093e8623b59">Top headlines</h2><ul><li>Democrats wished the election was about jobs. <a target="_blank" rel="noopener" href="https://www.businessinsider.com/how-trump-won-election-high-prices-cost-of-living-unemployment-2024-11">Trump's win showed it was about prices</a>.</li><li><a target="_blank" rel="noopener" href="https://www.businessinsider.com/china-economy-local-government-debt-rescue-trump-us-presidential-election-2024-11">China announced a $1.4 trillion stimulus package</a> to boost its economy on the heels of Trump's election.</li><li>Airbnb reported its earnings. <a target="_blank" rel="noopener" href="https://www.businessinsider.com/airbnb-earnings-shares-most-interesting-things-cohost-2024-11">Here are four highlights</a>.</li><li>Trump said he will divide Russia from China. <a target="_blank" href="https://www.businessinsider.com/donald-trump-plan-divide-china-russia-axis-is-likely-fail-2024-11">It's a tough bromance to break</a>.</li><li><a target="_blank" href="https://www.businessinsider.com/peter-thiel-prediction-correct-election-trump-harris-2024-11">Peter Thiel's 'contrarian'</a> election prediction came true.</li></ul><h2 id="8120060b-ae66-48dc-b149-f0489a30ffa2">3 things in markets</h2><div type="image" title="Photo of MAGA hat on exchange desk" height="655" width="1000" msid="115090331" hostid="261" sizebytes="44410"></div><ol><li>Morningstar thinks you should stay the course with your investment plan. Trump's win sent the stock market surging, but that <a target="_blank" href="https://www.businessinsider.com/trump-trade-election-investing-stock-market-strategy-sp500-valuations-morningstar-2024-11">doesn't mean you should rethink your investing strategy</a>, Morningstar Senior US Market Strategist Dave Sekera said. His call for restraint is partly due to how high stock valuations currently are, although he does see opportunity among small-caps.</li><li>The new Goldman execs who just got the call of a lifetime. Goldman Sachs tapped<a target="_blank" href="https://www.businessinsider.com/goldman-sachs-partners-revealed-see-full-list-names-diversity-women-2024-11"> 95 people to join its exclusive partnership</a> on Thursday, a record high under CEO David Solomon. Twenty-six of the new partners are women, a group closely watched after a series of high-profile female partner exits.</li><li>Trump's election might be Citi's saving grace. The bank has spent more than $7.4 billion addressing regulators' concerns, specifically about its data and risk problems. <a target="_blank" href="https://www.businessinsider.com/trump-election-citi-jane-fraser-regulators-frc-occ-2024-11">Donald Trump could ease that pain</a>. The president-elect has signaled he'd cut down on Wall Street oversight, previously pledging he'd eliminate 10 rules for each new one.</li></ol><h2 id="f4b54806-7f81-450c-ba32-92560d4fae9b">3 things in tech</h2><div type="image" title="Musk and Trump." height="2499" width="3329" msid="115090332" hostid="261" sizebytes="268836"></div><ol><li>How Elon Musk swung Pennsylvania for Trump. The tech tycoon <a target="_blank" href="https://www.businessinsider.com/elon-musk-pennsylvania-america-pac-donald-trump-harris-2024-11">spent millions on the Keystone State</a> to deliver it to Trump, launching a last-minute canvassing effort and untested ground-game techniques. Musk's strategy could usher in a "new era" in campaign spending, one political scientist told BI.</li><li>Big Tech's biggest winners and losers after Trump's victory. Which companies stand to gain the most under a new Trump presidency? BI looked at the two-day stock performance of <a target="_blank" rel="noopener" href="https://www.businessinsider.com/big-tech-winners-losers-trump-election-win-according-to-market-2024-11">many of the largest tech companies to find out</a>.</li><li>Trump's plan to "never ban" TikTok will be tough to fulfill, legal experts say. The former president campaigned on the promise that TikTok would be here to stay. <a target="_blank" rel="noopener" href="https://www.businessinsider.com/donald-trump-block-tiktok-ban-legal-experts-2024-11">But legal experts told BI he's only got two options to try and save it</a> — and neither of them are straightforward.</li></ol><h2 id="9260fa45-d397-4b3c-b4f8-4bb193976216">3 things in business</h2><div type="image" title="Image of Walmart sign outside store" height="1280" width="1920" msid="115090336" hostid="261" sizebytes="228442"></div><ol><li>Retail giants prepare for Trump 2.0. Tariffs are the biggest concern for superstores like Walmart, Target, and Costco. If the president-elect follows through on his campaign promises, consumers could foot the bill of high tariffs through higher prices. On the other hand, tax cuts could spur spending — <a target="_blank" href="https://www.businessinsider.com/trump-win-retail-impact-walmart-costco-target-tariffs-tax-cuts-2024-11">but they'd take many months to see results</a>.</li><li>The job market under Trump. Hiring experts expect a "Trump bump" as employers get comfortable posting openings now that the election's outcome is clear. They forecast a postelection hiring rush and <a target="_blank" href="https://www.businessinsider.com/trump-win-affect-job-hiring-trends-and-employer-confidence-2024-11">increased demand in some sectors</a>, particularly tech.</li><li>David Zaslav is optimistic about Trump's effect on Big Media. The Warner Bros. Discovery CEO wanted a president who was more open to M&amp;A, since his company has been eyeing consolidation for a while. A second <a target="_blank" href="https://www.businessinsider.com/wbd-trump-zaslav-consolidation-earnings-2024-11">Trump administration might provide that opportunity</a>, Zaslav said on WBD's earnings call, but it's too early to be certain.</li></ol><h2 id="1ad7b482-3f4b-44b4-81b6-a864aa386478">In other news</h2><ul><li>The Polymarket 'whale' actually made $85 million, <a target="_blank" href="https://www.businessinsider.com/polymarket-whale-banked-85-million-profit-trump-president-election-win-2024-11">far more than originally thought</a>.</li><li><a target="_blank" href="https://www.businessinsider.com/harris-lost-biden-unpopularity-trump-election-2024-11">Harris couldn't escape</a> Biden's unpopularity.</li><li>Investors accuse the ex-CEO of the company that helped take Trump Media public of <a target="_blank" href="https://www.businessinsider.com/ex-ceo-patrick-orlando-lawsuit-trump-media-investors-shares-2024-11">stiffing them out of millions of shares</a>.</li></ul><h2 id="9f5d80ac-3466-429f-a50a-2ffbb70c65ff">What's happening today</h2><ul><li>Paramount, Sony, and other companies report earnings.</li><li>Grammy Award nominations are announced.</li></ul>The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. Ella Hopkins, associate editor, in London. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.

Fed cuts rates again, but Trump's tariff plan sparks inflation fears and market uncertainty

Mumbai: The Reserve Bank is unlikely to cut the benchmark <keyword id="20071327" type="General" weightage="20" keywordseo="interest-rate" source="keywords">interest rate</keyword> in its forthcoming bi-monthly monetary policy review later in the week as <keyword id="19999652" type="General" weightage="20" keywordseo="retail-inflation" source="keywords">retail inflation</keyword> is still a cause of concern, and there is a possibility of the Middle East crisis deteriorating further, impacting crude oil and commodity prices, say experts. Earlier this month, the government reconstituted the Reserve Bank's rate-setting panel -- <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC). The reconstituted panel, with three newly appointed external members, will commence its maiden meeting on Monday. MPC Chairman RBI Governor Shaktikanta Das will reveal the outcome of the three-day discussion on Wednesday (October 9). The <keyword id="19899810" type="General" weightage="100" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has kept the repo or short-term lending rate unchanged at 6.5 per cent since February 2023, and experts think some easing could only be possible in December. The government has tasked the central bank to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side. In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have reduced the interest rates. "We do not expect any change in the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> or stance by MPC. The reason is that inflation for September and October will be above 5 per cent, and the present low inflation is due to the base effect. Besides, core inflation is inching upwards," said Madan Sabnavis, Chief Economist, Bank of Baroda. Further, the recent Iran-Israel imbroglio can intensify, and there is uncertainty here, he said. "Hence, the status quo is the most likely option even for new members. Inflation forecast may be lowered by 10-20 bps and no change in GDP forecast likely," said Sabnavis. The central bank last hiked the repo rate to 6.5 per cent in February 2023 and since then, it has held the rate at the same level. Icra Chief Economist Aditi Nayar said that given the undershooting in the initial first quarter GDP growth relative to the MPC's forecast and the likely sizeable undershooting in the second quarter CPI inflation print as well, "we believe a stance change to neutral may be appropriate in the October 2024 policy review". This could be followed by a shallow rate-cutting cycle of 25 bps each in December 2024 and February 2025, she added. "The abundant monsoon offers some insurance for crop inflation. The impact of global political developments and geopolitical uncertainty on the growth inflation dynamics remains a risk," Nayar added. An HSBC report said three developments stand out -- softer growth numbers have trickled in recently, inflation has been falling, and the external environment has moved from rate hikes to cuts. "We believe the RBI doesn't gain from waiting any longer. We think it will change its stance from a hawkish 'withdrawal of accommodation' to 'neutral' in the upcoming 9 October policy meeting, followed by repo rate cuts of 25 bps each in the December and February meetings, taking the repo rate to 6 per cent," the report said. The RBI kept the repo rate unchanged at 6.5 per cent in its August bi-monthly review amid risks from higher food inflation. This was the ninth consecutive MPC meeting, which decided to maintain the status quo on the rate front. Pradeep Aggarwal, founder and chairman, Signature Global (India) Limited, said while the real estate industry, developer community, and homebuyers are hoping for an interest rate cut in the upcoming monetary policy review, the RBI is likely to hold on to the interest rate cuts for the tenth consecutive time. "The apex bank still seems uncomfortable with the overall retail inflation scenario, particularly food inflation. As such, it is expected to maintain the status quo. The recent interest rate cut by the US Federal Reserve has ignited similar hopes even in India, but the domestic scenario is very different," he added. SBM Bank India Head Treasury Mandar Pitale believed that the MPC has persistently advocated a restrictive policy until inflation aligns durably towards the 4 per cent target. "With the unfavourable base effect taking the next couple of CPI prints near 5 per cent plus or minus, it will pose a major challenge for MPC to start easing from the October meeting," Pitale said, adding that the MPC is also expected to deliberate upon the global factors like growth-inflation behaviour in developed economies. The government has appointed Ram Singh, Saugata Bhattacharya, and Nagesh Kumar as external members of the MPC. They have replaced Ashima Goyal, Shashanka Bhide, and Jayanth R Varma. Apart from the Governor, the other internal members are the RBI Deputy Governor in charge of monetary policy Michael Debabrata Patra and the Executive Director monetary policy department of RBI Rajiv Ranjan. In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in the subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.

Status-quo on interest rate likely, say experts ahead of RBI's policy review

<ul><li>The Reserve Bank of India is expected to shift its <keyword id="23437409" type="General" weightage="20" keywordseo="monetary-stance" source="keywords">monetary stance</keyword> to 'neutral'.</li><li>As per a report by <keyword id="19895773" type="General" weightage="20" keywordseo="Nuvama" source="keywords" meta.keywordsubtype="org" meta.entityname="Nuvama" meta.hostid="261" meta.entityid="Nuvama">Nuvama</keyword>, <keyword id="19920341" type="General" weightage="20" keywordseo="rate-cuts" source="keywords">rate cuts</keyword> are likely to commence in December.</li><li>The Monetary Policy Committee (MPC) is likely to maintain the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> at 6.5% in its upcoming sitting.</li></ul>The Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) will shift its monetary stance to 'neutral' from the current 'withdrawal of accommodation' in credit policy this month, and rate cuts are likely to commence in December, according to a report by Nuvama. As per the report, the Monetary Policy Committee (MPC) is likely to maintain the repo rate at 6.5% in its upcoming sitting. However, several factors, including a slowdown in economic activity and benign <keyword id="20196112" type="General" weightage="20" keywordseo="core-inflation" source="keywords">core inflation</keyword>, are likely to prompt the central bank to soften its stance, the report added. A weaker-than-expected Q1 GDP growth continued slowing of high-frequency indicators in the second quarter, core inflation to near record lows, and fiscal tightening could be the key reasons behind the move, the report added. Additionally, the U.S. Federal Reserve's recent move which indicates ease in the rates will influence RBI’s decision, the report added. The growth rate for the first quarter of financial year 2025 was below the RBI's projection at 7%. The growth rate for the same period stood at 6.7%, signalling weak economic activities. Since then, indicators such as vehicle sales, cement volumes, fuel consumption, GST collections, and rural wages have witnessed sluggishness. The government spending has also been subdued in recent months. Exports have also witnessed a sluggishness after showing recovery earlier this year. "Overall, domestic demand is slowing amid weak exports. At the same time, fiscal policy is tightening while core inflation is near a series-low. Against this evolving growth-inflation mix, a tight monetary stance may not be warranted, particularly when the Fed has also commenced easing," the report added. Going forward the report highlighted that the economy may be reverting to pre-pandemic levels of weak demand, with capital expenditure-to-GDP ratios plateauing. Further supporting its assertion, it stated that while headline inflation remains above target, core inflation has consistently declined over the past 16 months, currently ranging between 3.1% and 3.3%. This reflects weak pricing power in the economy and muted growth in consumption-driven sectors, the report added. Furthermore, it states that the RBI's fiscal policy is contractionary, with tax revenue growth declining into the single digits. This could have an effect on the government's ability to increase capital expenditure in the upcoming quarters. Given the slowing domestic demand, weak exports, and the tightening fiscal stance, the RBI's current monetary stance may no longer be appropriate, according to the report. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/september-auto-sales-automakers-report-a-decline-mahindra-and-mahindra-overtakes-tata-motors/articleshow/113925972.cms">September Auto sales – Automakers report a decline, Mahindra and Mahindra overtakes Tata Motors</a> <a href="https://www.businessinsider.in/business/auto/news/ola-electric-continues-to-lose-market-share-as-bajaj-auto-and-tvs-motor-gain/articleshow/113900252.cms">Ola Electric continues to lose market share as Bajaj Auto and TVS Motor gain</a> <a href="https://www.businessinsider.in/tech/mobile/webstories/upcoming-smartphones-launching-in-india-in-october-2024/slidelist/113804125.cms">Upcoming smartphones launching in India in October 2024</a>

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