The Reserve Bank has kept policy rates (the rate at which lends
to/borrows from banks) and cash reserve ratio unchanged. That comes as
no surprise to the market, considering the high level of inflation in
the economy. But there are enough hints in the policy review that
suggest the central bank could start cutting rates as early as next
month.
Sample these:
“Headline inflation has been below the Reserve Bank’s projected levels over the past two months. The decline in core inflation has also been comforting.”
“In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards. Overall, recent inflation patterns and projections provide a basis for reinforcing our October guidance about policy easing in the fourth quarter.”
And yet, a rate cut should not be taken for granted, given the problems in both the local and global economies, which have not been fully resolved.
As last line in the RBI policy document states: “Risks to inflation remain and cccordingly, even as the policy emphasis shifts towards growth, the policy stance will remain sensitive to these risks.”
The government has shown some resolve in trying to put its finances in order, which was one of the prerequisite insisted upon by the RBI for a reduction in interest rate.
There has been some progress in terms of reforms over the last three months, but major issues such as subsidies, land and environment clearance, are still hanging fire.
Market participants are worried that the ruling UPA coalition may find it hard to keep to the path of fiscal discipline, as it prepares for the general elections in 2014.
In 2008, the year before general elections, the government had waived farm loans. So what is the big sop going to be this time?
Santosh Nair Editor, moneycontrol.com
Direct Link:- Click Here
Sample these:
“Headline inflation has been below the Reserve Bank’s projected levels over the past two months. The decline in core inflation has also been comforting.”
“In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards. Overall, recent inflation patterns and projections provide a basis for reinforcing our October guidance about policy easing in the fourth quarter.”
And yet, a rate cut should not be taken for granted, given the problems in both the local and global economies, which have not been fully resolved.
As last line in the RBI policy document states: “Risks to inflation remain and cccordingly, even as the policy emphasis shifts towards growth, the policy stance will remain sensitive to these risks.”
The government has shown some resolve in trying to put its finances in order, which was one of the prerequisite insisted upon by the RBI for a reduction in interest rate.
There has been some progress in terms of reforms over the last three months, but major issues such as subsidies, land and environment clearance, are still hanging fire.
Market participants are worried that the ruling UPA coalition may find it hard to keep to the path of fiscal discipline, as it prepares for the general elections in 2014.
In 2008, the year before general elections, the government had waived farm loans. So what is the big sop going to be this time?
Santosh Nair Editor, moneycontrol.com
Direct Link:- Click Here
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