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Markets won't react adversely to a new finance minister; expect RBI rate cut in June, says JP Morgan's Jahangir Aziz

Updated : May 30, 2019 09:52 AM IST

Jahangir Aziz, head of emerging market economics, JP Morgan, shares his views on the repercussions of the ongoing trade war between the United States and China, market's reaction to a new finance minister as Arun Jaitley steps aside, and the possible outcome of the upcoming Reserve Bank of India (RBI) monetary policy meeting.

“Things have turned for the worst. What is weighing down on people’s mind particularly for emerging market (EM) investors is what happens with the US-China trade war. We have a date for that, June 8-9 when the G-20 meeting is held and where the two sides will be meeting. People are still holding out hope that there will be some form of resolution or some form of positive news coming out of that but if that doesn’t work out then I think we are going to see a significant impact on global business sentiment, which will be driving down global capex investment further and that will be another round of bad news for emerging markets,” he said.

When asked who will be the next finance minister, Aziz added, “I wouldn’t even dare trying to figure out who is going to be the right person for the finance ministry. It doesn’t matter that much. There are certain things that the incoming finance minister will have to tackle. I don’t think the market will take it badly if it is not Arun Jaitley. I think there are certain things that need to be done and if that person echoes those concerns, I think the market will be perfectly fine. If the incoming minister does not do that, that is when the markets will be concerned that the incoming minister does not share the same concerns that the market has.”

Speaking about the Reserve Bank of India's (RBI) monetary policy, he said: “I think the RBI will cut rates and my guess is that, this will not be the only rate cut that will happen in this cycle, there will be further rate cuts.

"We will have to wait and see how the gross domestic product (GDP) numbers turn out this week and if we do see another quarter slowdown, you will probably see not just one but more than one rate cuts.”
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