Expectations of a rate tightening cycle were raised last week as the government announced its action plan to tackle inflation. Experts have arrived at a consensus now with most expecting at least a 25 bps hike in rates from the Reserve Bank of India (RBI) in its policy meeting on January 25.
Inflation has remained stubborly high for a considerable period of time as the government announced a series of measures to battle the bugbear. Asset prices too have risen sharply with commodities and property prices staying at elevated levels. The RBI had voiced its concerns on these at its November 2 meet. However, the RBI has been slightly behind the curve in raising interest rates, feels Tim Condon, Head - Asia Research at ING Financial Markets. Condon expects a greater than anticipated hike in interest rates from the central bank. "The central bank may surprise with more rate hikes than people had anticipated." He largely agrees with the argument that suggests that the second half of 2011 for emerging markets will be stronger. "But a lot of that depends on how the inflation picture plays out. But the consensus that inflation will be lower in the second half then emerging markets should have a better second half." On equities, Condon expects emerging European markets to do well post their underperformance in 2010. By and large, he expects the stock market in the US to end the year higher. Commodities, he said, will be driven by a recovering global growth and a negative dollar. Below is a verbatim transcript of Tim CondonDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
