RBI Bulletin: Central banks in tough spot due to challenging global growth

RBI bulletin is a monthly publication that gives insights into the economic developments in both India and abroad.

The challenging global economic environment will make it difficult for central banks to  decide when to pause and ease the monetary policy, the Reserve Bank of India (RBI) bulletin said on February 17.

“2023 would still be a challenging year. Central banks will find it difficult to gauge where to pause and ease,” the bulletin said.

Further, it said the worst of their fears can come true if indeed global growth slows but inflation remains elevated.

RBI bulletin is a monthly publication that gives insights into the economic developments in both India and abroad.

In the aftermath of multiple shocks, the global economy is projected to contract significantly in 2023. The worst for the global economy, both in terms of growth and inflation, seems to be behind us, the bulletin said.

Lately, the easing of COVID-19 restrictions and cooling of inflation allowed some central banks to go easy with rate hikes.

At the same time, they continue to emphatically reiterate their resolve to bring inflation down closer to targets. High policy rates for a longer duration appear to be a distinct possibility, going forward

While, on the growth front, projections are now veering around to a softer
recession as against a severe and more widespread recession projected a few months back.

In January, the International Monetary Fund's (IMF) top economist Pierre-Olivier Gourinchas had said the global growth outlook was less gloomy than the multilateral agency had predicted in October and that while rapid monetary tightening posed headwinds, the current situation "could represent a turning point, with growth bottoming out and inflation declining".

"The inflation news is encouraging, but the battle is far from won," Gourinchas said in a blog post released on January 31 along with the IMF's update to its World Economic Outlook report.

Whereas, earlier this month, the International Monetary Fund (IMF) has retained its GDP growth forecasts for India for 2022-23 and 2023-24 at 6.8 percent and 6.1 percent, respectively.

"Growth in India is set to decline from 6.8 percent in 2022-23 to 6.1 percent in 2023-24 before picking up to 6.8 percent in 2024-25, with resilient domestic demand despite external headwinds," the IMF said in an update to its World Economic Outlook report.