Economy

Food prices are a problem area but, other than that, inflation poses no challenge, economic affairs secretary Ajay Seth said at an event in New Delhi.Retail inflation in India soared to its highest level in 14 months in October, partly due to high prices of edible oils, onions and tomatoes.The Indian government’s infrastructure spending, critical to one of the world’s fastest economic growth rates, has been slow in the current year due to national elections. Between April and September, the government spent just over 37% of its budgeted target of 11.1 trillion rupees for 2024-25, compared with 49% of the previous year’s target, according to government figures. But Seth said the government saw no downside risks to its growth projection of 6.5%-7% for fiscal year 2024-25. More

In its Financial Stability Report for the second half of the year, the bank said households’ financial position continues to improve but remains below pre-pandemic levels.It said the local banking system had enough guarantees and capital to withstand severe shocks. Despite that, the bank said the main risk to domestic financial stability was posed by external factors.”Elevated levels of public and private debt in the world, along with high deficits, are the main worry,” the report said, noting this had led to high long-term interest rates.It added that rising geopolitical tensions over the past few months could have a negative impact on stability. Those most impacted would be groups the bank considers “most vulnerable”.On Tuesday the bank’s board voted unanimously to keep capital requirements for risk assets at the current level of 0.5%, a measure activated in May 2023 that obliges banks to set aside a cushion to absorb potential losses. More

BENGALURU/BEIJING (Reuters) – The United States could impose nearly 40% tariffs on imports from China early next year, a Reuters poll of economists showed, potentially slicing growth in the world’s second-biggest economy by up to 1 percentage point.The poll, the first on China’s economy by Reuters since Donald Trump’s sweeping election victory on Nov. 5, also predicts that the President-elect will resist starting off with blanket 60% tariffs on Chinese goods. Trump, who is due to take office in January, pledged during campaigning to slap hefty tariffs on Chinese imports as part of a package of “America First” trade measures, causing unease in Beijing and heightening growth risks for China.Not only are the threatened tariff rates much higher than the 7.5%-25% levied on China during his first term, the economy is also in a much more vulnerable position given the prolonged property downturn, debt risks and weak domestic demand.A poll of more than 50 economists by Reuters from Nov. 13-20 showed a strong majority, both in and outside mainland China, expects Trump to impose the tariffs by early next year, with a median estimate of 38% and projections ranging from 15% to 60%.Most respondents said they do not expect blanket 60% tariffs on Chinese goods in early 2025 as this could accelerate inflation within the United States.”We expect the new U.S. administration to bring back the original plan of Trump 1.0,” ANZ’s chief economist Raymond (NS:RYMD) Yeung said, estimating that the average tariff on Chinese goods could be raised by 32–37%. Chinese policymakers, who have ramped up stimulus to spur growth since late September, face increased pressure next year to spur domestic demand to offset an expected drop in exports – a key growth driver this year, analysts say.On the potential impact on China, the poll predicted that new U.S. tariffs would reduce China’s 2025 economic growth by around 0.5-1.0 percentage point.For now, however, most of the economists polled have maintained their median growth forecasts for this year and 2025 at 4.8% and 4.5%, respectively, consistent with projections made before the U.S. elections. Growth is expected to slow further to 4.2% in 2026. They are awaiting the Trump administration’s China trade policies, which could lead to potential downgrades in their outlooks.”Exports will be a key pillar of growth as global demand holds up, though new U.S. tariffs could shave up to 1 percentage point off GDP growth,” said Mo Ji, chief China economist at DBS. “Consumption will remain lacklustre due to wealth effects from falling property prices and rising unemployment. Infrastructure investment will drive a moderate fixed asset investment recovery, though private investment lags.”MORE STIMULUS EXPECTEDA strong majority of economists, or 19 of 23 who responded in the poll, said the recent fiscal and monetary stimulus measures announced by the Chinese government have had little impact on the economy and more stimulus is needed. Only four said that these measures would boost economic growth.Chinese authorities hope the burst of stimulus unveiled since late September would help the economy reach a government growth target of around 5% this year.China is likely to unveil fresh stimulus measures in the coming weeks to help cushion the economy from any trade tensions with the United States, say analysts, who expect the economy’s slowing trajectory will continue despite policy support.”We think the Chinese government still has time to monitor and react to the U.S. policy and its effect on China growth and then introduce policy responses at a later stage,” said Jian Chang, chief China economist at Barclays (LON:BARC).Economists polled by Reuters have also lowered their consumer price inflation forecasts to 1.1% for next year and 1.4% for 2026, down from the previously expected 1.4% and 1.6% in the October survey. The People’s Bank of China is expected to cut its key policy rate – the seven-day reverse repo rate – by 20 basis points to 1.30% early next year, with an additional 10 basis point reduction in the second half, according to the poll.(For other stories from the Reuters global long-term economic outlook polls package:)($1 = 7.2419 yuan) More

BENGALURU (Reuters) – The U.S. Federal Reserve will trim interest rates next month but make shallower cuts in 2025 than expected just a month ago due to the risk of higher inflation from President-elect Donald Trump’s proposed policies, according to most economists in a Reuters poll.Prospects for a price resurgence based on his planned policies, including higher tariffs and tax reductions, led markets to nearly halve rate cut pricing to around 75 basis points by end-2025 over the past few weeks.Relentless economic strength, stubborn inflation and stock markets flirting with record highs have become barriers against hasty rate cuts. Fed Chair Jerome Powell said last week “the economy is not sending any signals that we need to be in a hurry to lower rates.”Still, nearly 90% of economists, 94 of 106, in the Nov. 12-20 Reuters poll expected a 25bp cut in December, taking the fed funds rate to 4.25%-4.50%. Twelve expected no change, compared to only three in last month’s survey.But market pricing showed there is now less than a 60% chance of a December cut. Until recently only a few were betting against such a move.”We’re still calling for a December cut. We think the data will behave. But you can see why markets kind of pricing another sort of coin flip…the economy is still very strong, inflation is still running above target,” said Stephen Juneau, a U.S. economist at Bank of America.”We’ll see deregulation, easier fiscal policy, more protectionist trade policy and a tighter immigration stance. They all kind of pose an upside risk to inflation…the Fed is unlikely to cut as deeply as we previously considered because they’re going to see inflation continue to be stuck above their target.”BofA recently upped its terminal fed funds rate forecast to 3.75%-4.00% from 3.00%-3.25%.The inflation outlook over the next two years was broadly upgraded from last month, poll medians showed, with personal consumption expenditures (PCE) inflation – the Fed’s preferred gauge – predicted to mostly remain above the Fed’s 2% target until at least 2027.An 85% majority, 57 of 67 respondents, said the risk of inflation resuming next year had risen.Most economists said Trump’s proposed tariffs would be implemented early next year, which according to a strong majority, 44 of 51 will have a significant impact on the U.S. economy.Tariffs on imports from China could shave up to 1 percentage point from Chinese economic growth next year, a separate Reuters poll showed.”A universal tariff… on all imported goods and even higher tariffs on Chinese goods are likely to lead to a rebound in inflation,” said Philip Marey, senior U.S. strategist at Rabobank.”Keep in mind unemployment is still relatively low and, especially with increased border security, it would not take long for wage pressures to creep back up. This only reinforces our long-held call the Fed’s cutting cycle will be cut short in 2025.” The Fed will deliver a 25bps cut in the first three quarters but then be on hold, poll medians showed, putting the fed funds rate at 3.50%-3.75% by end-2025, 50bps higher than last month’s projection. But there was no clear consensus.Nearly 30% of economists, 29 of 99, predicted the rate to be in a 3.75%-4.00% range or higher and 28 saw it at 3.50%-3.75%, higher than the Fed’s 2.9% current estimate of the neutral rate, which neither stimulates nor restrains the economy.Among 72 common contributors in this and last month’s poll, two-thirds, 48, lifted their end-2025 rate forecasts by around 50bps on average.The U.S. economy, which grew an annualized 2.8% last quarter, will expand 2.7% this year and 2% in 2025 and 2026, poll medians showed. That is faster than what Fed officials currently see as the non-inflationary growth rate of 1.8% over coming years.(Other stories from the Reuters global economic poll) More

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SYDNEY (Reuters) – The mandate for Australia’s sovereign wealth fund will grow to include domestic housing, energy and infrastructure in a major revamp unveiled on Wednesday that nudges the A$230 billion ($150 billion) fund towards government priorities.The changes add new mandates for investments that build more housing and infrastructure, or speed the carbon emission transition to net zero as long as they are “possible, appropriate and consistent with strong returns.” The fund’s return target will not change.”This will mean more investment where we need it most but not at the expense of returns,” Treasurer Jim Chalmers said in a statement.A domestic emphasis is common among sovereign wealth funds. Saudi Arabia’s Public Investment Fund increasingly invests at home, while Singapore’s state-owned investor Temasek holds a quarter of its assets domestically. However, months before an election, the decision is likely to draw criticism from opponents who see the changes as an extension of the centre-left Labor government’s political priorities.The former chairman of the fund, a long-time treasurer in previous conservative governments, warned last year against spending the fund on political projects.Chalmers said the fund’s board had been consulted on the changes.The Future Fund was set up in 2006 with proceeds from the sale of state telco Telstra (OTC:TLGPY) to cover unfunded pension liabilities and bolster the government’s balance sheet.Chalmers pledged to delay drawing on the fund until at least 2033 so it has more time to grow. By then the government expects it to hit A$380 billion in assets.($1 = 1.5326 Australian dollars) More

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