Making Sense

  We had the release of the U.S PCE Report which broadly came in line with consensus expectations. Snapshot ▲ YoY ▲ MoM ▲ 3M Change ▲ 6m Change Headline PCE 2.45% 0.33% 3.35% 2.50% Core PCE 2.78% 0.26% 3.47% 2.87% Durable Goods -2.02% 0.19% -0.26% -1.76% Non Durable Goods 0.76% 0.66% 0.66% -0.82% Services 3.81% 0.26% 4.84% 4.33% Energy Goods & Services -2.30% 2.30% 2.26% -4.24% Headline CPI 3.17% 0.44% 3.93% 3.18% Core CPI 3.76% 0.36% 4.12% 3.82%   PCE Price Index for Feb rose 0.33% mom and Core PCE Prices rose 0.26% mom following a 0....

Summary: In this article, I have attempted to estimate the Fx Intervention - both onshore and offshore by using Durable Liquidity and RBI data on Sale / Purchase of USDs and Outstanding Forward Position. I also reckon that Durable Liquidity and CiC numbers can help give broad estimates of Fx intervention on a more real time basis relative to the release of the monthly bulletin.  According to my calculations, between Aug / Sep / Oct , RBI intervened close to $ 40 bn. The Central Bank is now allowing it to gradually roll off and ~ $19 bn of NDF positions have rolled off since peak intervention.   The Durable Liquidity increased 22,928 crs over the fortnight ending 08 Mar 2024 to 186,908 crs. Remember, Changes in durable liquidity arises from permanent or long term changes in the liability of the Reserve Bank, i.e. change in Currency in Circulation (CiC) or change in Banking System Reserve Balances due to unsterilized Fx intervention or OMOs. CiC has increased to the tune of 36,...

The FOMC policy is out of the way. Let's recap the Fed Rate decision, key pointers from the Post Policy Conference and what I'm think about the Fed Policy going forward. Interest Rates were left unchanged 5.25% - 5.50% The Summary of Economic Projections showed 2024 GDP Growth being revised higher while U/R was revised 10 bps lower and Core PCE Inflation was revised 20 bps higher while leaving the FFR projections unchanged at 4.6%. Interestingly, the projections for 2025 and 2026 FFR were both revised 25 bps higher and a 10 bps increase to the longer run neutral rate. The longer run neutral rate was revised higher for first time since June 2022 - Is it a tacit acknowledgement by the Fed that Neutral Rates have moved higher as markets have been talking about it all along. There are 9 officials who see longer run FFR above 2.5% compared to 2 in the June 2022 policy. Refer to the table below for forward and long term projections. Interesting in the table above is the Implied M...

India recorded a trade merchandize deficit of $ 18.70 bn and a services surplus of $ 16.76 bn, thus registering a combined deficit of $ 1.95 bn. Extrapolating averages, I see Current Account Deficit at $ 24 bn for FY23-24 and an even lower number if I adjust the actuals with the trend for the months of Jan and Feb, at ~ $ 20 bn which I think is a more probable outcome.

 "We have two classes of forecasters: Those who don't know - and those who don't know they don't know" We had 3 data releases out of the US yesterday. Snapshots below: 1. Jobless Claims data – The week reflected annual revisions to the seasonal adjustment factors 2. Retail Sales data – Retail Sales Control was flat mom following an upward revision of 10bps to prior month’s figure of -0.40%. The control group is all sales, excluding receipts from auto dealers, building-materials retailers, gas stations, office supply stores, mobile homes and tobacco stores that feeds into the GDP.  The Atlanta Fed GDPnow estimates Q1 GDP at 2.30% from prior 2.5%. 3. The most important print out yesterday was the PPI report which stoked inflationary concerns after the strong CPI data. The rise in Core Goods CPI was also seen in Goods PPI which rose a 1.21% mom and surge in Energy which rose 4.35% mom. The estimates of core PCE deflator following the PPI report suggest ...