The last three years for the central bankers were not easy as they swung to the current restrictive phase from being overtly accommodative. Conventional economic markers are expected to lower the signal-to-noise ratio amid raised geopolitical tension heightening the overall backdrop with inflation and economic activity still adjusting to pandemic-induced behavioural changes and policy responses. This is why the central banks have been divided into three camps in recent months. If you are scrambling to the web regarding the same, keep following this article. The three camps in which the central banks are divided are the groups of countries that have 21.2 percent, 15.2 percent, and 51.5 percent share of the world GDP. Let’s delve deep into the details and explore it in detail.
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Talking about one of the three camps in which central banks have been divided, the first camp is in a minority at this time. This group includes Brazil, China, Peru, Chile, and Poland. It has started its rate-easing cycle. This group holds a sizeable share of the world GDP, 21.2 percent. The second group which accounts for a total of 15.2 percent of the world has 15 countries including India. The second camp has maintained a status quo on monetary policy in the past four months. Continue reading this article to learn more details.
The third and last camp has the majority of the world GDP as it accounts for a total of 51.5 percent of the world GDP. This camp is a group of 16 countries excluding Turkey and Russia, that have elevated their monetary policy rate at least once in the past four months. Apparently, at the start of the pandemic, the synchronized monetary policy cycle seen now seems to be disintegrating, with central banks responding to domestic challenges and idiosyncratic in every country. However, emerging market (EM) and developed market (DM) central banks are clearly divided. While the EM central banks have started the first camp (to turn dovish) or have preferred the second camp (to stay neutral), the DM central banks dominate the third camp of hawkish players.
The recent run-up in commodity prices especially crude oil and US yields poses a systemic risk for growth, financial stability, and inflation for the whole world. This would require judicious use of policy room and careful assessment of spillover impacts to address the emerging macro-financial challenges. India is expected to remain moderate in growth in FY24.