Macro policy for uncertain times

External storms are morphing into hurricanes. India is in a relatively better position than many other countries, but this period of heightened volatility will require agility and clarity on policy

Despite recovering from the pandemic, repeated global shocks have presented numerous challenges for India’s economy this year, driving inflation and evoking balance of payments (BoP) pressures. These shocks will likely persist for much longer. 

In the US, even amidst signs of weakening growth, underlying inflation remains too high for the Fed to pivot; we expect the fed funds rate to rise to 5.25-5.50 per cent by early next year, which means further market repricing is likely. The synchronised global tightening, inventory destocking and the cost of living crisis mean that the world is in the midst of a synchronised global