India’s central bank has opted to maintain its benchmark interest rate at 6.50%, prioritizing inflation control while grappling with a slowing economy.

The Reserve Bank of India’s (RBI) decision, announced on Friday, aligns with market expectations but underscores the delicate balancing act required to sustain growth in Asia’s third-largest economy.

This comes as inflation surges and GDP growth shows signs of deceleration, raising concerns about the economic outlook for the year.

The move to keep interest rates steady was widely anticipated after India’s retail inflation climbed to a 14-month high of 6.21% in October, breaching the RBI’s tolerance ceiling of 6% and significantly exceeding its target of 4%.

The spike in consumer prices adds to the pressure on policymakers to navigate a path that controls inflation without stifling economic activity.

Economic growth has also slowed markedly.

During the July-September quarter, the Indian economy expanded by 5.4% year-on-year, well below the 6.5% growth projected by economists in a Reuters poll.

This marked the slowest growth rate in nearly two years and raised doubts about the government’s forecast of 7.2% growth for the fiscal year ending March 2025.

Amid these challenges, calls for lower borrowing costs have gained traction.

Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal have emphasized the need for more affordable interest rates to boost industrial investment and consumer demand.

Sitharaman, speaking at a recent event in Mumbai, stressed, “At a time when we want industries to ramp up and build capacities, bank interest rates will have to be far more affordable.”

RBI Governor Shaktikanta Das has cautioned against premature rate cuts despite these appeals.

In the October policy meeting, the central bank shifted its stance from “withdrawal of accommodation” to “neutral,” signaling a pause rather than a pivot toward monetary easing.

Das reiterated the risks of cutting rates too soon, emphasizing that such a move could destabilize the economy.

The RBI’s position is further complicated by the performance of the Indian rupee, which recently hit an all-time low of 84.659 against the US dollar.

Any immediate monetary easing could exacerbate currency pressures and trigger capital outflows.

LSEG data highlights the rupee’s vulnerability amid global economic uncertainty, particularly as major central banks adjust their monetary policies.

On the markets front, India’s Nifty 50 index has demonstrated resilience, rising modestly since the GDP figures were released and showing a 13.7% year-to-date gain.

In contrast, the MSCI Asia ex-Japan index, which has significant exposure to India, has declined around 12% during the same period.

Indian bonds have also seen fluctuations, with the 10-year benchmark yield hitting its lowest point since February 2022 earlier this week before rising slightly post-RBI decision.

As Shaktikanta Das prepares to conclude his term as central bank governor later this month, the RBI’s cautious approach highlights the complexities of managing inflationary risks without derailing growth.

With inflationary pressures persisting and growth momentum slowing, India’s policymakers face tough decisions in the months ahead.

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Chinese stocks surged to their highest level in two weeks on Friday, driven by growing hopes of fresh stimulus measures ahead of the Central Economic Work Conference next week.

The CSI 300 Index, which tracks onshore stocks, rose as much as 1.9%, led by financial and technology shares.

Meanwhile, a gauge of Chinese stocks traded in Hong Kong advanced by 2.1%, reflecting widespread optimism.

This marked the highest level for the CSI 300 since November 21, as investors bet that Beijing will introduce policies aimed at reviving a slowing economy.

“Investors are looking forward to next week’s Central Economic Work Conference and the possibility of further reductions in the reserve requirement ratio by the Chinese central bank this month,” said Kenny Ng, a strategist at China Everbright Securities International.

By 1:19 pm, GMT+8, the index had given up some of the gains and was 1.27% higher.

Stimulus bets intensify ahead of policy meeting

The Central Economic Work Conference, an annual closed-door meeting of China’s top policymakers, is expected to map out economic targets and stimulus plans for 2025.

Anticipation of significant announcements at the event has reignited interest in Chinese equities, which had struggled to sustain a recent rally.

Adding to the optimism, global investment banks, including Goldman Sachs and Morgan Stanley, predict that the People’s Bank of China (PBOC) will implement aggressive interest-rate cuts in 2025.

These cuts, projected at 40 basis points by some analysts, could be the largest in over a decade.

Billy Leung, an investment strategist at Global X ETFs, noted that local traders are discussing the possibility of rate cuts as high as 60 basis points next year.

Asia’s equities recover partially

The rebound in Chinese stocks helped Asian equities gauge reverse losses to edge 0.1% higher on Friday.

Gains in China offset declines in Japan, South Korea, and Australia, where markets remained subdued after overnight losses on Wall Street.

The S&P 500 and the tech-heavy Nasdaq 100 dropped 0.2% and 0.3%, respectively, on Thursday, snapping a five-session winning streak.

Market sentiment in the US was dampened by rising jobless claims, which hit a one-month high, even as attention turned to Friday’s pivotal nonfarm payrolls report.

Political stability aids South Korea’s markets

In South Korea, the won pared earlier losses following assurances from the Army Special Forces Commander that there would be no second martial law or troop deployments.

Despite this, the country’s benchmark stock index fell 0.7%.

To address recent volatility in its currency, South Korea announced plans to enhance after-hours liquidity in the won.

The yen remained steady against the dollar after some fluctuations, following a record increase in base salaries for regular workers in Japan.

Jobs report to set the tone for markets

Friday’s nonfarm payrolls report has emerged as a key market driver amid mixed economic signals in the US.

Economists expect a rebound in November, with 220,000 jobs likely added after hurricanes and labor strikes weighed on October’s figures.

Market participants are also eyeing how the data will influence Federal Reserve policy.

Treasuries remained steady in Asia, with long-bond yields slightly lower.

Swap trading suggests a 70% likelihood of a quarter-point rate cut at the Fed’s December meeting.

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Gold prices rose in the Asian trade on Friday as investors waited for cues from the release of the US non-farm payrolls data later in the day. 

Geopolitical tensions also spurred safe-haven demand for gold, boosting prices. 

Gold prices on COMEX had dipped to a low of more than a week earlier in the session on Friday.

However, prices have recouped the losses and are currently over $2,660 per ounce. 

At the time of writing, the February gold contract on COMEX was $2,664.19 per ounce, up 0.6% from the previous close. 

Investors will be waiting for the key nonfarm payroll data from the US later in the day as it is one of the preferred gauges for the Federal Reserve to assess the country’s economic health. 

Haresh Menghani, editor at FXstreet, said in a report:

Any meaningful appreciating move, however, seems elusive ahead of the US Nonfarm Payrolls (NFP) report, which will be looked upon for the interest rate outlook in the US and provide a fresh impetus to the non-yielding bullion. 

On the geopolitical front, political turmoil in France and South Korea has kept safe-haven inflows into gold. Tensions in the Middle East, and between Russia and Ukraine also remained high. 

Focus on economic data

“The closely watched US jobs data will guide the Federal Reserve (Fed) policymakers on their next monetary policy decision later this month, which, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the non-yielding gold price,” Menghani said. 

Along with the nonfarm payroll data, traders will also be eyeing the unemployment rate in the US, which will provide the number of unemployed people in the country. 

Both data come out ahead of the much-anticipated US Fed’s policy meeting on December 17-18. 

According to the CME FedWatch tool, traders are pricing in a 71.8% probability of the US central bank cutting rates by 25 basis points later this month. 

There have been concerns that the US Fed may slow down the rate-cut cycle as the US economy remains resilient. 

Recent comments from Fed Chair Jerome Powell suggested that the central bank will be cautious with its approach to future rate cuts. 

Elevated interest rates weigh on demand for gold as it is an unyielding commodity, unlike bonds. 

Copper rises on tight supplies

Meanwhile, copper prices on the London Metal Exchange rose on Friday as miners had agreed to much lower processing fees for 2025, amid concerns over the availability of the copper concentrated in spot markets. 

Chile’s Antofagasta and China’s Jiangxi Copper had agreed to substantially lower fees to process copper concentrate for 2025, Reuters reported. 

Fees usually tend to decline amid lower levels of concentrate in spot markets, indicating tight supplies, according to the Reuters report.

Next week, China is expected to release inflation and trade data.

China’s Central Economic Work Conference is also scheduled for next week, which will provide more cues on stimulus packages. 

China is the top consumer of base metals, particularly copper.

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David Sacks, a prominent venture capitalist and former PayPal executive, has been appointed as the “White House A.I. & Crypto Czar” by US President-elect Donald Trump.

Known for his deregulatory stance, Sacks is expected to focus on providing regulatory clarity for digital assets while adopting a light-touch approach to AI governance.

Who is David Sacks?

Born in South Africa and now 52 years old, David Sacks has had a storied career in technology and business.

He is a founding member of the “PayPal Mafia,” a group of influential tech entrepreneurs that includes Elon Musk and Peter Thiel.

During his tenure as PayPal’s COO, he helped establish the platform as a leading payment processor before it was acquired by eBay in 2002.

Sacks later founded Yammer, an enterprise social network that Microsoft purchased for $1.2 billion in 2012.

He also served as CEO of Zenefits and co-founded Craft Ventures, a venture capital firm that has backed successful startups like SpaceX, Reddit, and ClickUp.

David Sacks and his support for cryptocurrencies

Sacks has been a vocal advocate for cryptocurrencies, describing them as fulfilling the “original vision” of PayPal—a system where payments remain within a secure, decentralized network.

In a 2017 interview with CNBC, he called Bitcoin and Ethereum revolutionary, likening them to a “decentralized web” or an “internet of money.”

His hands-on experience with cryptocurrencies extends to holding assets like Solana (SOL) and investing in blockchain startups.

Sacks’ technical and commercial understanding of digital currencies is seen as a significant advantage as he takes on his new role.

While Sacks has not been as outspoken about artificial intelligence, his approach to governance aligns with the views of Silicon Valley’s libertarian-leaning investors.

Observers predict he will prioritize regulating the use of AI in critical applications rather than imposing heavy restrictions on AI development—a stance that contrasts with more stringent regulatory efforts like California’s failed SB 1047 bill.

What will be David Sacks’ responsibilities as Crypto and AI ‘Czar’?

In his new role, Sacks will oversee the development of a comprehensive legal framework for the cryptocurrency industry, addressing the lack of clarity that has hindered its growth in the US.

This includes leading a newly established White House advisory council on science and technology.

Additionally, he will work alongside other Trump-appointed officials, including Paul Atkins at the SEC, to ensure that US policy fosters innovation while implementing necessary guardrails.

Sacks’ deregulatory leanings suggest a pro-growth environment for digital assets and AI, aligning with Trump’s vision to make the US the “crypto capital of the planet.”

Industry and peer reactions

Sacks’ appointment has been met with enthusiasm from industry leaders.

OpenAI CEO Sam Altman congratulated him on X (formerly Twitter), while Kindred Ventures founder Steve Jang praised his balanced regulatory approach.

According to Matthew Dibb, CIO at Astronaut Capital, Sacks brings a level of technical and commercial competence that positions him as a transformative figure in both the crypto and AI spaces.

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The US labor market is poised for a significant rebound in November, following October’s storm-induced slowdown.

Economists are optimistic about a sharp recovery, with consensus estimates pointing to a net gain of 207,500 jobs.

The Bureau of Labor Statistics (BLS) will release its November jobs report at 8:30 a.m. ET on Friday.

This anticipated recovery contrasts sharply with October’s meager addition of just 12,000 jobs—the smallest increase in nearly four years.

Back-to-back hurricanes and a major labor strike were key contributors to the weak showing, which economists now view as an outlier.

Despite the turbulent month, the unemployment rate is expected to remain unchanged at 4.1%, consistent with levels seen since September.

Dan North, senior economist for Allianz Trade, noted the extraordinary circumstances of October. “I told my readers to essentially disregard last month’s report,” he told CNN.

“The BLS itself admitted that the hurricanes and strikes rendered the data inconclusive. A substantial bounce back in November is not just likely but rational,” he said.

November recovery reflects labor market resilience

November’s expected gains suggest a return to the labor market’s underlying strength.

Gus Faucher, chief economist at PNC Financial Services Group, predicts job growth of 250,000 positions for the month.

This figure points to a baseline monthly payroll increase of approximately 150,000 jobs, excluding the recovery from October’s anomalies.

“That’s a solid number,” Faucher told CNN. “It reflects a healthy labor market supporting income growth, which, in turn, drives consumer spending.”

Several indicators reinforce the view that the labor market remains robust.

Layoff activity has remained historically low, with unemployment claims trending downward in recent weeks.

The Job Openings and Labor Turnover Survey (JOLTS) for October showed a rise in job openings to 7.7 million, up from 7.4 million in September, surpassing economists’ expectations of 7.5 million.

Labor trends: Layoffs low, hiring steady

The labor market has shown resilience in the face of external pressures.

Layoff announcements for November totaled 57,727, a modest 3.8% increase from October, according to Challenger, Gray & Christmas.

Meanwhile, the layoffs and discharges rate remained at 1% in October—close to an all-time low.

“Overall, we still have a tight labor market,” said Faucher. “Employers are cautious about laying off workers, even if they are scaling back on new hires.”

First-time filings for unemployment benefits rose slightly last week, reaching a six-week high of 224,000.

However, continued claims for unemployment insurance, which reflect the number of people receiving benefits for a prolonged period, declined, suggesting no significant spike in joblessness.

Another positive sign is the increase in voluntary quits.

While the number of workers quitting their jobs rose by 228,000 in October to 3.3 million, it remains below year-ago levels.

This indicates that employees feel confident enough to seek better opportunities, a hallmark of a strong labor market.

Federal Reserve policy: Rate cuts likely to continue

Despite expectations of strong job growth in November, the Federal Reserve is unlikely to deviate from its current course of interest rate cuts.

Market participants are pricing in a 74% probability of a quarter-point rate reduction at the Fed’s December meeting, according to the CME FedWatch Tool.

Russ Brownback, head of global macro positioning at BlackRock, views the Fed’s current policy stance as restrictive.

“The real policy rate, after adjusting for inflation, is higher now than it was in mid-2023, even though inflation has significantly eased,” he explained.

The Fed’s preferred inflation gauge, the core personal consumption expenditures price index, showed a 2.8% year-over-year increase through October.

While this is below its 2022 peak, it remains above the central bank’s 2% target.

Fed Chair Jerome Powell acknowledged the balancing act during a recent appearance at The New York Times DealBook Summit.

“We’re not quite there on inflation,” Powell said. “But the economy is in very good shape, and we’re now on a path to bring rates back down to a more neutral level over time.”

Stock market strength and economic optimism

The strong labor market and resilient economy have buoyed investor sentiment.

Major stock indices, including the Dow Jones Industrial Average and S&P 500, reached record highs this week.

The S&P 500 has surged 27.6% year-to-date, driven by robust corporate earnings and consumer spending.

Yardeni Research has turned more optimistic about the labor market’s outlook.

The firm projects an average monthly job growth of 200,000 over the next quarter, citing improved hiring trends as the economy normalizes post-pandemic.

“We’ve argued all year that the labor market was recalibrating from the unsustainable hiring spree during the pandemic,” Yardeni Research noted in a recent report.

“Now, we see signs of renewed momentum.”

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