Expert Zone
Straight from the Specialists
When will the repo rate be reduced?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
In his policy review on Oct. 30, Reserve Bank of India (RBI) Governor D. Subbarao stuck to his position that money cannot be made cheap when commodities are becoming expensive.
So, the repo rate has to stay where it is. When that cannot change, the reverse repo rate and the marginal standing facility rate have to stay put. That is what the RBI has been doing for six months now. The last time the repo rate was reduced was in April.
But the RBI has taken care to lubricate the wheels of the economy. There was liquidity deficit brought about by the wedge between deposit and credit growth of banks. Deposits have been increasing at 14 percent (y-o-y) while credit expansion was at 16 percent. To bridge the liquidity gap, Subbarao reduced CRR from 4.5 to 4.25 percent. That would put an additional 175 billion rupees of primary liquidity into the banking system.
Time to think beyond monetary policy rates?
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
Irrespective of the RBI monetary policy review and its outcome, the fact that policy rates have assumed such obsessive focus needs closer scrutiny.
Investors shouldn’t read too much into repo rate cut
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The last time the Reserve Bank of India (RBI) surprised the markets was when it announced a 75 bps cut in cash reserve ration (CRR) days before its mid-quarter review of monetary policy on March 15. It did so again in its annual monetary policy meeting on April 17, with a 50 bps repo rate cut when the markets were either expecting no rate cut or a 25 bps rate cut at best.
RBI rate cut — too little, too late?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The RBI Governor cut the repo rate on April 17 quite reluctantly, even hinting there wouldn’t be another cut soon. Perhaps, he was under pressure from elsewhere, compelling him to look beyond inflation which had been his sole criterion in raising the repo rate.
Cost of a rate cut delay in India
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The RBI took the first step to ease monetary policy by reducing CRR by 50 basis points on Jan. 24. However, it postponed an interest rate cut, in spite of the advice by the special committee, only to confirm its reputation of being cautious. But excessive caution can also cost the country a pretty penny.
The end of repo rate hike?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Apparently, the RBI is exasperated. After 18 months of inflation and 13 hikes in repo rate, RBI Governor Duvvuri Subbarao more or less admitted a day before Diwali that the pursuit of interest policy had gone far enough even though it hardly made any different to inflation and only deflated the growth rate instead. But he is not without hope.
Two problems, one strategy for both RBI and the Fed
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The Reserve Bank of India and the U.S. Federal Reserve were confronted with two different problems but used the same monetary strategy for solution. Neither succeeded.
The one-instrument orchestra
(Nipun Mehta is a veteran private banker with many years of experience across Asia. The views expressed in the column are his own and not those of Reuters)
The Reserve Bank of India on Tuesday quite unexpectedly raised interest rates by as much as 50 basis points. It was a move that shocked the street and took a lot of people by surprise. It was also a move showing aggressive intent at inflation management.
