Favourable US Inflation, Likely Rate Cut In Sep To Impact India's Policy Trends: S&P

The easing inflation and weakening job market trends in the US, as revealed in the recent figures will push the Federal Reserve to cut interest rates which will lead to lower rates in developing countries like India, indicates S&P Global on Friday.

The year-on-year inflation in the US reached its lowest level in August, down from 3 per cent in June this year. As of August 21, the annual inflation rate stood at 2.9 per cent in the US.

On Wednesday, the data released by the US Bureau of Labor Statistics showed that about 818,000 jobs were created in March this year, which is lower than expectations.

As per the agency the size of the rate cut cannot be anticipated but the strong growth conditions observed via the latest flash PMI indicate a supportive environment for the rate cut.

The US data on consumer confidence, personal income and spending data will help to shape the inflation picture and thereby steer monetary policy expectations for the market, the report added.

As per the Global Credit Rating Agency, economies around the world will be keenly eying the economic data post-Jackson Hole Symposium.

"Growth and inflation conditions updates will be key as central bankers around the world contemplate rate cuts in line with the trajectory expected for the US Fed," the report added.

"The attention turns back to economic data post the Jackson Hole Symposium, with July's US core PCE data to be especially keenly assessed," says the report

The Federal Reserve's Jackson Hole Economic Symposium is a three-day annual international conference hosted by the Federal Reserve Bank of Kansas City at Jackson Hole in the US. The event is attended by central bank leaders from around the world.

US Federal Reserve Chairman Jerome Powell will address the symposium later today Friday, August 23. He may clarify whether inflation has cooled enough to justify a rate cut in September and whether he is worried about a rising unemployment rate. 

"Following the release of August flash PMI data for major developed economies and India, mainland China's PMI from the National Bureau of Statistics will be due over the weekend ahead of worldwide manufacturing and services PMI releases at the start of September," the rating agency said.

In India, the Reserve Bank of India has decided to keep the policy repo rate unchanged at 6.5 per cent. RBI says food inflation is a significant factor for the central bank before taking any decision on lowering policy rates. The inflation rate in India eased to 3.54 per cent in July, from 5.08 per cent in June. (ANI)