CPI inflation to moderate to 7% by Mar ’14

inflation

CPI inflation to moderate to 7% by Mar ’14: Morgan Stanley

Terming the consumer price index based inflation as critical to assess the domestic economy in the current environment, a research report by Morgan Stanley said the CPI reading is likely to moderate to around 7 per cent by March from the present level of 10.9 per cent.

 “We expect the CPI inflation to moderate from 10.9 per cent currently to around 7 per cent by March,” the report said. Giving the rationale behind such moderation, the report said factors like impact of slower government spending, slow rural wage growth among others, would help in reducing the sconsumer inflation.

 “Since last September, total government spending has been on a decelerating trend. Moreover, the government has controlled expenditure except interest and subsidy payments… as the government delivers fiscal consolation, it will help contain aggregate demand- thus reducing inflationary pressures,” the report said.

 It further said agricultural wages have shown signs of moderation, which would help in easing inflation pressure. “We believe this moderation, after almost five years of acceleration, will also help to lower food production costs and bring about a moderation in food and hence overall inflation,” it said.

 The report also said that other factors like slower rise in global commodity prices like oil, moderation in asset prices such as housing and slower growth in domestic demand would also help in containing CPI inflation.

 “We believe that the sharp slowdown in domestic demand will finally start weighing on CPI inflation trend over the next six months,” it said. Referring to high current account deficit and fiscal deficit coupled with slowing growth, the report said that despite growth concerns, the worst may be behind.

 “Though trailing macro data points are a cause of concern, we believe that the worst may be behind with regard to macro stability indicators. “The government has initiated steps to correct the bad growth mix (high fiscal deficit and low investment spending). We believe this will help to gradually improve the macro stability indicators,” the report said.

ECB keeps rates unchanged

ecb

 

Main rate stays at 0.75%.

The European Central Bank has kept eurozone interest rates on hold. The main refinancing rate stays at 0.75%, where it has been since July 2012.

Although the decision was widely expected, some analysts expect the ECB to cut rates in the coming months.

Mario Draghi, the president of the ECB, will hold a press conference later this afternoon to explain the decision.

UK has already returned to growth

uk recession

UK has already returned to growth, says OECD

Hopes that Britain will avoid a triple-dip recession were bolstered after a leading forecaster said the country had already returned to growth and official figures showed the key services sector expanding at its strongest pace in five months.

 The UK economy will dodge a recession with a return to yearly growth of 0.5pc in the first quarter of this year, according to the OECD.

The UK enjoyed yearly growth of 0.5pc in the first quarter of this year, to be followed by a 1.4pc expansion in the next three months, according to estimates from the Organisation for Economic Co-operation and Development.

“The UK is doing fairly well I would say … this avoids a triple-dip in that country,” said Pier Carlo Padoan, the OECD’s chief economist. “We see a global outlook improving after a weak 2012.”

The Paris-based think-tank’s growth projections compared to the UK economy’s 1.2pc contraction in the final three months of last year, as the OECD uses annualised rather than quarterly growth rates. On a quarterly basis, the UK economy shrank by 0.3pc at the end of last year.

The more upbeat outlook was echoed in the US, where officials reported that the world’s biggest economy grew faster than thought in the fourth quarter of last year, at an annual rate of 0.4pc, up from an initial 0.1pc estimate.

The news cheered Wall Street, pushing the S&P 500 share index into fresh highs as it hit 1,567 points at one point, above its 2007 all-time record.

Current account deficit rises to alarming 6.7% in Q3

current account deficit

India’s current account deficit (CAD) widened from 5.4 per cent in the July-September quarter to a record high of 6.7 per cent of GDP in the October-December quarter, driven mainly by huge trade deficit, said a release by the Reserve Bank of India. This is much higher than the 6.4 percent estimated by a Media poll.

 A surge in capital flows helped finance the current account deficit.

 “The pickup in capital flows was mainly due to foreign portfolio investment which rose to USD 8.6 billion during Q3 of 2012-13 from USD 1.8 billion in Q3 of previous year. While loans availed by banks and corporate sector amounted to USD 7.1 billion, net Foreign Direct Investment (FDI) declined to USD 2.5 billion in Q3 of 2012-13 from USD 5 billion in the corresponding quarter of 2011-12,” the RBI release said.

 Exports growth during the third quarter was muted as compared with a 7.6 per cent growth in Q3 of 2011-12, the RBI release said.

 Imports, however grew 9.4 per cent, spurred largely by oil and gold imports.This has resulted in the trade deficit widening to USD 59.6 billion in Q3, compared to USD 48.6 billion during the corresponding period of the previous year.

Why Cyprus Is a Special Case

 

The Cyprus bailout deal is a big improvement over the first botched attempt. It doesn’t repeat the error of breaching the guarantee on bank deposits up to 100,000 euros. Instead, it restructures the two biggest banks and forces their creditors, including large depositors, to take huge losses.

Yet the euro area’s leaders must do a lot more to convince Europeans and the markets that they have drawn the right lessons from this debacle. They need to say clearly why Cyprus is an exception and commit to integrating the euro area further so that it’s less vulnerable to such crises. They’re failing on both points.

 

March 26  — John Woods, Hong Kong-based chief investment strategist for Asia Pacific at Citigroup Inc.’s private bank, talks about the economic impact of Cyprus’s banking crisis on the rest of Europe. He speaks with Susan Li and Rishaad Salamat on Bloomberg Television’s “Asia Edge.” 

March 26  — Philippe D’Arvisenet, chief global economist at BNP Paribas SA, talks about Europe’s sovereign debt crisis and the outlook for the euro. Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid. D’Arvisenet speaks in Singapore with Haslinda Amin on Bloomberg Television’s “On the Move.”

The head of the euro area group of finance ministers, Jeroen Dijsselbloem, appeared to draw all the wrong conclusions in a March 25 interview, after the new deal was struck. He suggested that the Cyprus pact offered a new template for resolving the debt crisis.

Under this new model, the burden of repairing banks would shift from taxpayers to private creditors. Specifically, Dijsselbloem said he hoped the new approach meant that the 500- billion-euro European Stability Mechanism would never be used to directly recapitalize banks.

Rail travel gets costlier as fares hiked by upto 20%

g

pavan

 

 

In the first hike in ten years, Union Railways Minister Pawan Kumar Bansal on Wednesday increased passenger fares by upto 20 percent across the board.

 

The new fare will be effective from January 21 midnight. Indian Railways is looking to raise Rs 6,600 crore through the fare hike.

 

The Rail Minister said that extra revenue earned through the fare hike will be used to maintain cleanliness and safety. He also said that the Railways is making efforts to meet safety requirements. The minister added that there will be no fresh fare hike in the Rail Budget.

 

As per the new fare chart, following changes have been made in the passenger fare:

 

2nd class ordinary suburban- 2 paise per Km

 

2 class ordinary non suburban- 3 paise per Km

 

2nd class mail express train- 4 paise per Km

 

Sleeper class- 10 paise per Km

 

Ac chair car- 10 paise per Km

 

Ac 2 tier- 15 paise hiked earlier and additional 6 paise now

 

Ac first class- 10 paise per Km hiked earlier, in addition 3 paise per Km now