This article summarises a panel discussion at GIC Insights 2021 with Tharman Shanmugaratnam, Singapore’s Senior Minister and Deputy Chairman of GIC; Axel A. Weber, Chairman of UBS Group AG; and Natarajan Chandrasekaran, Chairman of Tata Sons.
Moderated by Jeffrey Jaensubhakij, GIC’s Group Chief Investment Officer, the conversation focused on policy responses to key global economy challenges including rising inflation, sustainability, and inequality. The panellists also shared their perspectives on global growth, and opinions on what central banks should do going forward.
Rising inflation and interest rate outlook
With growth strong and inflation rising, the Federal Reserve has announced tapering measures, a move expected to be followed by rate hikes in 2022. Despite inflation likely to remain above average targets, the panel expected US rate increases to be moderate over the next few years.
The panel thought the European Central Bank (ECB) would taper its balance sheet at a slower pace and move rates only a year or two later. The ECB was expected to exit negative rates but not move strongly into positive territory. Likewise, other central banks in Europe would not see much of a tightening cycle.
For emerging markets, the immediate concern was to pre-empt capital outflows in the face of developed market rate hikes. Indeed, some had already hiked rates as inflation started rising.
The panel discussed India’s numerous policy and reform measures including corporate tax, goods and services tax, insolvency and bankruptcy policies, and the inflation target framework. These, together with asset monetisation plans, including the privatisation of airports and infrastructure, would support sustained growth despite potential global monetary tightening.