homeeconomy NewsExpect US Fed to hike rate by 150 bps in 2022; India’s GDP growth likely at 7.5% this year: Morgan Stanley
Expect US Fed to hike rate by 150 bps in 2022; India’s GDP growth likely at 7.5% this year: Morgan Stanley
As inflation in the US continues to heat up and the market continues to price in rate hikes by the US Fed, CNBC-TV18 caught up with Chetan Ahya, Chief Asia Economist, Morgan Stanley, to get a sense of what to expect on the macro front.
As inflation in the US continues to heat up and the market continues to price in rate hikes by the US Fed, CNBC-TV18 caught up with Chetan Ahya, Chief Asia Economist, Morgan Stanley, to get a sense of what to expect on the macro front.
Ahya affirmed that inflationary pressures are unusually high. He expects a 150 basis points (bps) hike by the Fed in 2022. According to him, while the US team is of the view that the Fed might consider a 50 bps hike, it is still not a done deal. He mentioned that US still has one more jobs data and inflation print prior to its March meet. Ahya believes the US Fed Chair Jerome Powell’s testimony will play an important role in signalling the steps that they might take in the future. Ahya believes that the market in the US is currently pricing in a policy rate of 1.5-1.6 percent.
He said, “The forecast that our US team is making, they are basically saying that the Fed would probably be considering a 50 bps high, but it is still not a done deal. We have one more inflation and jobs data points to look at before the March policy meeting and Chair Powell will be giving a testimony in Humphrey-Hawkins event in the Congress and that will be the indication that Chair Powell will be giving to the market whether they want to go ahead with 50 bps rate hike or not."
"So it’s not a done deal yet, but chance of 50 bps rate hike has increased and overall the committee will, when they meet in March indicate that they will take up 150 bps hike in 2022. The markets are currently pricing in Fed policy rate at end of 2022 at 1.5-1.6 and oscillating between that. So markets are also around the same in terms of what we think that the Fed would indicate in its dot plot in March meeting,” he said.
Shedding light on India’s inflation picture, Ahya is of the view that there’s no need for an aggressive rate hike in the country as inflation is still in its early stages here. He also highlighted that headline inflation for India will be 4.6 percent. Ahya believes that the Reserve Bank of India (RBI) is underestimating inflation numbers.
He said, “The US is entering into a late-cycle stage considering the state of the labour market and at the same time, considering the inflationary pressures that they are facing and in this cycle, we are seeing unusually high inflation pressures even higher than what we had seen in 2001-2007. So, this is a very different cycle for the US and for Asia. It’s in the early to mid-cycle stages. India is probably in the early cycle stage and so it doesn’t need to take up aggressive tightening so soon.”
On GDP growth, he estimates it at 7.5 percent in 2022 and at 7.2 percent in 2023. “We are forecasting the calendar year 2022 GDP growth to be 7.5 percent and next year in 2023 calendar year, it would be 7.2 percent. We are still maintaining that bullish view on the growth outlook. We think that this is the cycle which is going to be very strong for India, very much unlike what we have seen in the last 10 years,” said Ahya.
For the entire interview, watch the video
Catch minute-by-minute updates on the stock market, and more, here:
(Edited by : Dipikka Ghosh)
First Published: Feb 15, 2022 3:30 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Mark Mobius reveals how markets will react if NDA wins 400+ Lok Sabha seats
May 15, 2024 8:09 PM
Wine shops and bars to remain shut for 4 days in Mumbai in 4 weeks, check details
May 15, 2024 7:52 PM
INDIA bloc will win majority seats in Bihar, says Tejashwi Yadav
May 15, 2024 4:20 PM