Morgan Stanley's Chetan Ahya says RBI underestimating inflatio | Start Learning
Morgan Stanley's Chetan Ahya says RBI underestimating inflation, 50 bps hike by Fed no done deal
On February 15, data released by the government showed that inflation measured by the Consumer Price Index hit a seven-month high of 6.01 percent in January
Morgan Stanley Chief Asia Economist and Co-head of Global Economics Chetan Ahya told business news channel CNBC-TV18 on February 15 that the Reserve Bank of India may be underestimating the inflation numbers in the country.
The RBI’s Monetary Policy Committee on February 10 surprised the financial community with its dovish stance on monetary policy as well as inflation. The MPC said that inflation will fall towards its medium-term target of 4 percent in the second half of the next financial year.
The RBI’s Monetary Policy Committee on February 10 surprised the financial community with its dovish stance on monetary policy as well as inflation. The MPC said that inflation will fall towards its medium-term target of 4 percent in the second half of the next financial year.
The central bank’s dovishness on inflation comes at a time when globally developed markets are witnessing an acceleration in inflation not seen since the 1980s due to strong labour markets and continued supply crunch caused by the after-effects of the COVID-19 pandemic.
Governor Das has reiterated that the nature and drivers of inflation at home and in developed economies are markedly different.
The US Federal Reserve has made a sharp pivot towards raising interest rates in the coming months with traders betting on the central bank to hike policy rates by five times this year alone from the record low of 0-0.25 percent.
Ahya said that the Morgan Stanley’s US team expects the US Fed to raise interest rates by 150 basis points this year and that a 50-basis-point hike is on the table for the upcoming meeting in March.
However, Ahya suggested that the 50 basis points hike that investors are pricing in for March may not yet be a done deal given that there is one more print of retail inflation due before the Fed’s rate-setting panel meets.
Ahya also said that India’s economy was likely to grow 7.5 percent in 2022 and 7.2 percent in 2023.
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