Summary
 

Taming inflation has become the singular pursuit of monetary policy actions globally.

Central banks earlier wary of stepping on growth to control inflation, have now firmly put their weight behind the latter. The consequences - global growth slowdown and higher interest rates in the near term.

In India too, the Reserve Bank of India’s (RBI) Monetary Policy Committee has been continually turning up rates, just short of a 200 basis points hike so far this fiscal.

The RBI’s rate action can be seen as a response to two kinds of risks: one, persistent risks to inflation which has remained above the upper tolerance band of its target for nine months now, and two, spillover risks from the aggressive monetary policy stance of major central banks, especially the US Federal Reserve.

CRISIL’s Financial Conditions Index shows that domestic financial conditions are on a tightening trend given the global shocks and domestic monetary policy tightening, but so far remain in a comfortable zone.

Meanwhile, the pandemic, followed by the Russia-Ukraine war, continues to impact the Indian debt markets on issuances, liquidity, and rates.
Sovereign issuances rose sharply owing to the fiscal situation of the government.

On the other hand, corporate bond issuances have shrunk, owing to the uncertain economic environment.

Earlier, corporates could borrow cheaper from banks, as the cost of funds were low due to ample liquidity. Though the Russia-Ukraine crisis led to higher rates, the spreads for state loans and benchmark corporate bonds continued to narrow due to limited supply.

We see a reversal in some of these trends as this fiscal unfolds.

How domestic rates move from here will, among other things, crucially hinge on the future course of monetary policies globally.

Eminent panellists:

For any assistance/ query, please call: Nupura Paigankar | +91 22 3342 8415 | Nupura.Paigankar@ext-crisil.com

Disclaimer: This event and its content are intellectual property and confidential information of CRISIL. Any use of the same without written permission of CRISIL is illegal and hence punishable. Recording the webinar in any form in full or part or copying, altering, distributing or streaming the webinar is strictly prohibited and violation will attract legal action.