October 16, 2021

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Credit growth in policy decisions in India, US, UK and Brazil

Credit growth in policy decisions in India, US, UK and Brazil

1. Credit growth in India

The Reserve Bank on Friday will release information on commercial bank loans and deposits for the next fortnight ending September 10. There has been improvement since July, but debt waivers are below previous government levels and on a slower path, rising only 6.7% year-on-year in the fifteen weeks ending August 27th.

Growth comes mainly from agricultural activities and personal loans. Industrial credit growth returned to positive territory in July, but despite a rapid recovery in economic activity it was only 1%. This trend is unlikely to change significantly in recent times. Some parts of the economy have reached pre-epidemic levels, but businesses are facing supply-side production barriers.

However, economists expect the debt to evaporate as the recovery takes place. The upcoming festive period, in particular, will lead to the beginning of the demand renaissance, which will lead to improvements in credit growth.

2. US Federal Reserve Meeting

The US Federal Open Market Committee will announce its monetary policy decision on Wednesday. Inflation is still high, but the steady print of 5.3% in August eased the challenge for the US Federal Reserve and should provide some leadership for policymakers.

A breakthrough in economic growth may support the central bank’s approximate position, as employment data for August was disappointing. The resurgence of state-19 cases has impacted the development trajectory, so a state of emergency has been declared by several states due to Hurricane Ida and tropical storm Nicholas. Until recently, analysts expected the central bank to announce a deadline for incentive cuts this week. However, the peak signs of inflation and the recovery recession have changed sentiments. Any of these ads may be delayed. Uncertainty over the direction the central bank will take is worrying emerging markets.

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3. US BMI

Immediate measurements of the US Purchasing Managers’ Index (BMI) for September will be released on Thursday. There was a healthy vigor until May, but the pace of growth was already showing signs of peaking. The consolidated BMI fell to an eight-month low of 55.4 in August. Production and services expanded strongly, but at a slower pace due to a shortage of raw materials and the rise of a renewed government.

The recession is expected to continue until September due to the economic impact of the delta type. Profits are rising in the aviation and hospitality sectors.

Continued supply disruptions and inflationary pressures may also weigh on activity in September. However, the PMI is expected to be above the 50 mark separating the contraction from the expansion.

4. UK Policy Code

The Bank of England (BoE) will announce its sixth monetary policy decision for this year on Thursday. The meeting comes against the backdrop of retail inflation hitting a nine-year high of 3.2% in August.

Some economists warn that inflation requires rapid policy action, as it could double the BoE’s 2% target by the end of the year. However, as BoE Governor Andrew Bailey pointed out earlier this month, the central bank may be more concerned about a slower economic recovery. In July, new government-19 cases reduced monthly GDP growth to just 0.1%.

Bailey cited supply chain disruptions and labor shortages as a recession, but said he hoped supply disruptions would be “resolved.” Comments suggest that the BoE may choose a wait-and-see approach before tightening interest rates.

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5. The reason for the policy of Brazil

Brazil sees a steady increase in its retail inflation, although its central bank became the first bank in the world to withdraw policy stimulus earlier this year. Inflation rose to 9.68% in August and 8.99% in July, due to higher food and fuel prices. This will cause concerns when the Gobham Price Committee announces its monetary policy on Wednesday.

The group has raised the Belmark Celtic rate four times since March. However, August inflation was the highest in 21 years and was three times higher than the target set by the central bank. Depreciation, drought and higher international commodity prices, among other factors, will continue to push up prices.

While the economy is still in the early stages of recovery, analysts expect inflationary pressures to force Gobom to raise Chelsea by another 100 basis points.

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