Highlights:
Global Economy
- Fed delivered a dovish surprise in December.
- ECB and BoE maintained a hawkish pause.
- BoJ said it will not hesitate to take extra easing measures if needed.
Domestic Economy
- Domestic economic activity remains healthy.
- Durable recovery in demand, particularly rural demand remains critical.
- IIP growth jumped to a 16-month high in October aided by favorable base.
- CPI inflation rose to a 3-month high in November; Core inflation continued to ease.
- Weak progress in Rabi sowing poses risks for food inflation.
- Merchandise trade deficit in November retreated from a record high level.
- Persistent weakness in exports continues amid subdued external demand.
- Increase in services trade surplus and healthy transfers supported narrowing of CAD in Q2 FY24.
- 10Y IN – US yield differential has improved by ~90bps since October.
- Crude oil prices up from 6-month lows to ~USD 80 per barrel amid weaker dollar and supply concerns.
