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A weekly round-up of crucial economic events

THIS WEEK'S HIGHLIGHTS

The current week was embedded with monetary policy meetings of the G4 central banks, each taking steps towards policy normalization, although at varying speeds- i) the FED turned hawkish by accelerating bond tapering and signaled three rate hikes in 2022, ii) the Bank of England raised the bank rate to curb inflation, iii) the BoJ announced to begin unwinding its bond purchase programme, while keeping its interest rates on hold, and iv) the ECB further reduced its bond purchases but vowed to continue its unprecedented monetary policy support in 2022.

Further on the global front, the Omicron variant continued to remain in the spotlight-i) the 1st death due to Omicron was reported in the UK, where daily cases are breaking records, ii) a study in China revealed Omicron to be 70x more infectious vs. the Delta/original variant but caused lesser infection in the lungs, iii) Pfizer stated its COVID-19 pill to be c. 90% effective in the final trials with lab data suggesting retention of efficacy against the new variant. In India, Omicron infections crossed 100 and the detection of cases in people with no international travel history surfaced as a point of worry.

Given the above, i) the INR touched 76.09, the lowest since mid-Jun’20, and ii) Brent crude fell to WoW to USD 72.9/bbl.

Domestically, other key highlights included- i) Cabinet approval of the PLI scheme for semiconductors with an outlay of INR 760bn over the next 6 years, ii) 90% YoY growth in advance tax collections in 3QFY22, iii) WTO’s ruling that India’s sugar subsidies are inconsistent with global norms, and iv) issuance of the PCA framework for NBFCs by the RBI.

Data releases during the week showed-i) lower-than-expected CPI inflation in Nov’21, although core goods inflation continued to rise, and ii) WPI inflation hit the highest levels in the 2011-12 series, recording 2-digits for the 8th consecutive week. In the coming week, we keenly look forward to the minutes of the monetary policy.

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