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RBI may wait for a few more months to raise interest rates, says survey

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RBI may wait for a few more months to raise interest rates, says survey

Faced with relatively low inflation amid a global surge, the Reserve Bank of India will still wait at least a few more months before it joins other central banks in raising interest rates following the pandemic, a Reuters poll found.

Among the hardest-hit emerging economies from shutdowns and disruptions to business by COVID-19, India has only recently begun to recover much of its lost ground and New Delhi’s latest budget was modestly stimulative compared with expectations.

Indeed, the RBI has been notably dovish, having kept its key repo rate at a record low of 4.00% for nearly two years.

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Respondents in a Feb. 2-4 Reuters poll were closely split on the timing of the next rise, with slightly more than half, 17 of 32, expecting 25 basis point rise to 4.25% in April.

Among the remaining 15, 13 were nearly split between June and August. While only one economist said it would come as early this month, the other said October of this year.

That would follow a widely-expected interest rate rise from near-zero in March by the U.S. Federal Reserve, which is grappling with the highest consumer inflation since 1982.

Economists expect at least another two to follow, while markets are pricing in four more.

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Nearly two-thirds of respondents in the latest poll, 24 of 38, see one more RBI rate rise by year-end, little changed from a poll taken last month.

But the pressure is rising for India’s central bank – well behind peers like Brazil, which has already raised its key interest rate by 875 basis points since March 2021 – to begin tightening.

“Ideally, the RBI should have been more worried about containing inflation, but it has been more worried about lifting growth. It is possibly behind the curve. But at this point, it’s very difficult to say what is right or what is wrong,” said Kunal Kundu, India economist at Societe Generale.

“Post the budget announcement and given a global environment where everybody is normalising monetary policy, I don’t think the RBI has many options left on the table.” The RBI was forecast to raise the reverse repo rate – the rate at which it borrows from banks – to 3.55% from 3.35% at its meeting on Thursday, narrowing the corridor between it and the repo rate to 45 basis points.

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India’s central bank has rescheduled its monetary policy committee meeting, delaying it by a day to Feb. 8-10, it said in a statement on Sunday, citing a public holiday in the state of Maharashtra to mourn the death of Bollywood singer Lata Mangeshkar.

Respondents were divided about what would be the biggest driver for RBI rate rises this year.

About half of economists responding to an additional question, 15 of 31, said combating high inflation would steer its moves. Another 12, or 39% of respondents, said playing catch-up with the Fed. The rest said the RBI would tighten policy to prop up the rupee.

“The RBI would not only have to manage the delicate growth-inflation trade off but also find answers to the vexed question of fiscal dominance of monetary policy and prepare itself for any spillovers from accelerated Fed tightening,” noted Samiran Chakraborty, chief economist for India at Citi.

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Inflation is expected to remain below the RBI’s upper tolerance limit of 6% until at least 2024, according to the poll, but trend above the medium-term target of 4%.

Asked if the RBI was behind the curve with its monetary policy strategy, 19 of 29 said it was not, while the rest said it was.

Complete News Source : Business Standard

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Pahalgam Attack

Pachigam attack aftermath: International airlines avoid Pakistani airspace amid tensions with India

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Pachigam attack aftermath: International airlines avoid Pakistani airspace amid tensions with India

Due to a lengthier path, Lufthansa Flight LH760 from Frankfurt to New Delhi had to fly for over an hour longer on Sunday. Major foreign airlines, including Air France and Lufthansa, are avoiding Pakistani airspace as tensions between India and Pakistan remain high after a deadly terrorist assault in Pahalgam, Jammu and Kashmir, according to airlines and flight trackers on.

Monday. Air France agreed, stating that it had decided to halt flights over Pakistan due to the “recent evolution of tensions” between the two South Asian foes. “The airline has decided to suspend overflight of Pakistan until further notice,” Air France said in a statement, referring to the “recent evolution of tensions” between India and Pakistan The airline currently changing.

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In the wake of the recent Pachigam terror attack, a significant shift in international aviation routes has occurred. Following an uptick in security concerns and rising geopolitical tensions between India and Pakistan, several international airlines have opted to avoid Pakistani airspace, rerouting their flights to ensure passenger safety. The decision comes nations.

The Pahagam Terror Attack: A Trigger for Renewed Tensions

On the night of the attack in Pachigam, a popular tourist destination in Jammu and Kashmir, militants carried out a series of strikes on civilian and military targets. The assault left a number of casualties, both military personnel and civilians, sparking widespread condemnation. The attack, attributed to militant groups operating from across the border.

Airlines’ Concerns Over Safety and Security

In response to the escalating threat in the region, several international airlines, including prominent carriers from Europe, the Middle East, and Asia, have started to reroute their flights to avoid crossing Pakistani airspace. These precautionary measures, while not unprecedented, are a direct reflection of the security situation that has worsened in the wake of the attack.

Airlines typically rely on international aviation corridors for the fastest and most efficient flight paths, and Pakistani airspace has historically been a critical component of many international routes connecting Europe and Asia. However, in light of the heightened risk of military conflict, commercial carriers have begun to take proactive steps to avoid the region.

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European carriers, such as Lufthansa and Air France, have adjusted their flight paths over the past few weeks, choosing to bypass Pakistan altogether. Similarly, Middle Eastern giants, like Emirates and Qatar Airways, have rerouted certain flights to avoid potential risks associated with flying in close proximity to the disputed borders. These changes have led to longer flight.

The International Air Transport Association (IATA) has noted that these changes, while necessary, come with considerable logistical and financial consequences. Airlines must navigate alternative routes, which may lead to higher fuel consumption and longer durations of travel. Nevertheless, passenger safety is the highest priority, and the industry remains.

Diplomatic Implications and Regional Stability

The rerouting of international flights has far-reaching implications, not only in terms of aviation logistics but also for regional diplomacy. The decision to avoid Pakistani airspace can be seen as a subtle but clear indication of the international community’s concerns regarding with the growing uncertainty in the region, underscores the volatile nature of South the security situation between India and Pakistan. Such moves may further isolate Pakistan.

The Future of Aviation in the Region

As the situation unfolds, the aviation industry is closely monitoring developments. For international carriers, navigating the delicate balance between commercial operations and national security concerns is no small task. In the coming weeks, further changes in flight patterns are expected, depending on how the diplomatic and military tensions between India.

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