Analysts at BBH note that the Reserve Bank of India hiked its repo rate (6.25% form 6.00%) for the first time since 2014.
Key Quotes
“It is responding to price pressures and external factors, chief among these identified by current central bank Governor Patel in an op-ed piece earlier this week in the Financial Times. He argued that the Fed should slow its pace of unwinding its balance sheet because between its tightening and the huge fiscal stimulus announced, that dollar liquidity is evaporating, putting more pressure on emerging market countries (i.e., India).”
“The irony lies in the fact that when the Fed was engaged in QE, then-Governor Rajan complained and fanned the talk of currency wars. Now that the Fed is unwinding QE that too is subject to criticism. Fed Chief Powell, like his predecessor, pushes back at the idea that the US policy drives global capital flows. The US is a current account deficit country. It must import savings from other countries. Moreover, it is difficult to imagine a more transparent Fed policy. Though we advocate a press conference after every Fed meeting, it is more for operational flexibility than improved transparency.”
Share
