RBI hikes repo rate, cuts MSF by 25 bps each; CRR unchanged

Reserve Bank of India (RBI) Governor Raghuram Rajan raised repo rate by 25 bps to 7.25 percent in the second quarter monetary policy review. The apex bank also rolled back MSF rate by 25 bps to 8.75 percent thus restoring "normalcy" and left CRR unchanged at 4 percent.

The RBI also increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 percent of NDTL of the banking system to 0.5 percent with immediate effect.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.75 percent and the Bank Rate stands reduced to 8.75 percent with immediate effect.

With these changes, the MSF rate and the Bank Rate are recalibrated to 100 basis points above the repo rate. Repo rate is the effective policy rate that decides lending rates in the economy.

Consensus on the street pointed to a 25 bps rate hike to 7.75 percent and rolling back of emergency measures applied to tame the rupee.

In his previous monetary policy review, announced weeks after assuming office as RBI governor, Rajan stunned market by raising repo rates

The RBI has been struggling for a year now to bring down inflation which has remained stubbornly high despite all possible measures, which led to slowdown in growth. Meanwhile, annual food inflation touched its highest point since mid-2010 to 18.4 percent in September.

Reserve Bank of India (RBI) Governor Raghuram Rajan raised repo rate by 25 bps to 7.25 percent in the second quarter monetary policy review. The apex bank also rolled back MSF rate by 25 bps to 8.75 percent thus restoring "normalcy" and left CRR unchanged at 4 percent. The RBI also increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 percent of NDTL of the banking system to 0.5 percent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 6.75 percent and the Bank Rate stands reduced to 8.75 percent with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 100 basis points above the repo rate. Repo rate is the effective policy rate that decides lending rates in the economy. Consensus on the street pointed to a 25 bps rate hike to 7.75 percent and rolling back of emergency measures applied to tame the rupee. In his previous monetary policy review, announced weeks after assuming office as RBI governor, Rajan stunned market by raising repo rates The RBI has been struggling for a year now to bring down inflation which has remained stubbornly high despite all possible measures, which led to slowdown in growth. Meanwhile, annual food inflation touched its highest point since mid-2010 to 18.4 percent in September.

Read more at: http://www.moneycontrol.com/news/economy/rbi-hikes-repo-rate-cuts-msf-by-25-bps-each-crr-unchanged_978635.html?topnews=1&utm_source=ref_article

Just before RBI Policy

RBI Macroeconomic Review: FY14 growth forecast cut to 4.8% Vs 5.7%

The Reserve Bank of India's Macroeconomic Survey released on Monday lowered FY14 growth forecast to 4.8 percent from 5.7 percent, thus fuelling street fears that governor Raghuram Rajan will resort to a hawkish stance while announcing the monetary policy on Tuesday.

 

The report also lowered FY15 growth forecast to 5.8 percent from 6.5 percent and warned that both wholesale and consumer price inflation (WPI & CPI) are likely to stay above comfort level in the second half of this fiscal.

While it raised FY14 average WPI forecast to 6 percent from 5.3 percent, it lowered FY15 WPI forecast to 5.5 percent to 5.7 percent.

 

The central bank is widely expected to increase the repo rate by 25 basis points on Tuesday to 7.75 percent to fight inflation even as it continues to unwind its rupee defense steps, a Reuters poll showed.

 

India's headline wholesale price index inflation rose to a seven-month high 6.46 percent in September, driven by food prices such as a 322 percent jump in the cost of onions, while consumer inflation quickened to 9.84 percent. In its report, the RBI noted that a drop in food inflation is required to bring down broader consumer price inflation.

 

"However, pending sufficient supply responses, it is important that monetary policy keeps a tight leash to prevent relative price shocks in the current year from getting generalised," it said.

(With inputs from agencies)

Nifty Fut 29-Oct-2013 || Ahead of RBI Policy

Xpert Nifty

29-Oct

Tuesday 29-Oct, RBI Governor today going to announce policy, which is very big event for market.

is simple words if i expect impact then .25 BPS increase in CRR will be good for market and we may see,

buying pressure in 2nd half of the day.

Anything less or more then CRR could lead to massive fall.

Technically NF Fut closing below 6050 will turn into -ve or down side.
 

 

RBI Macroeconomic Review: FY14 growth forecast cut to 4.8% Vs 5.7%

The Reserve Bank of India's Macroeconomic Survey released on Monday lowered FY14 growth forecast to 4.8 percent from 5.7 percent, thus fuelling street fears that governor Raghuram Rajan will resort to a hawkish stance while announcing the monetary policy on Tuesday.

The report also lowered FY15 growth forecast to 5.8 percent from 6.5 percent and warned that both wholesale and consumer price inflation (WPI & CPI) are likely to stay above comfort level in the second half of this fiscal. While it raised FY14 average WPI forecast to 6 percent from 5.3 percent, it lowered FY15 WPI forecast to 5.5 percent to 5.7 percent.

The central bank is widely expected to increase the repo rate by 25 basis points on Tuesday to 7.75 percent to fight inflation even as it continues to unwind its rupee defense steps, a Reuters poll showed.

India's headline wholesale price index inflation rose to a seven-month high 6.46 percent in September, driven by food prices such as a 322 percent jump in the cost of onions, while consumer inflation quickened to 9.84 percent.

In its report, the RBI noted that a drop in food inflation is required to bring down broader consumer price inflation.

"However, pending sufficient supply responses, it is important that monetary policy keeps a tight leash to prevent relative price shocks in the current year from getting generalised," it said.

(With inputs from agencies)