It is seen that some developed market economies are upgrading their growth forecasts and their central banks are echoing hawkish undertones, stated Yes Bank Report. It further added that, however, emerging marketing economies continue to maintain caution.
The report further pointed out the differentiator seems to be dominated by the number of COVID-19 infections and the pace of vaccinations.
Within the emerging marketing economies, Bank of Thailand downgraded its growth projection amid the outbreak of the third and most severe wave of COVID-19 infections. The central bank now expects 2021 GDP growth in the range 1-2 per cent from its March expectation of 3 per cent.
“Likewise, the Reserve Bank of India highlighted risks to the country’s nascent growth
recovery in its recent meeting due to the onslaught of the second wave of COVID-19 infections and relatively slow pace of vaccinations,” stated the report. However, RBI has kept the FY22 GDP growth forecast unchanged from the February policy meet at 10.5 per cent.
List of some developed economies that have upgraded forecast
- Bank of Canada upgraded its growth forecast by a sharp 2.5 percentage points to 6.5 per cent for 2021, stated Yes Bank Report. This is mainly due to improving consumer and business confidence, support by monetary and fiscal policy, faster pace of vaccinations and higher commodity prices. This also led the central bank to signal its intent to raise the benchmark interest rate from a record low of 0.25 per cent in late 2022 and to taper its weekly net government bond purchases by C$ 1 billion to C$ 3 billion, stated the report. Accordingly, the Bank of Canada became the first major central bank to signal tapering the post pandemic stimulus.
- The Bank of England also revised its 2021 GDP growth estimate to 7.25 per cent from its February estimate of 5.0 per cent. Although the central bank kept the key policy rates and guidance unchanged, it trimmed the size of its weekly bond purchases to GBP 3.4 billion per week from USD 4.4 billion per week, stated the report.
- The US Federal Reserve Chairman Jerome Powell pushed back on the need to taper monthly bond purchases of USD 120 bn anytime soon, as the economy is still far from its employment and inflation targets.