Is there still a surprise element in the credit policy to be announced by the RBI this week?
On the face of it the answer is probably no, as the mid-term lowering of rates has set to rest speculation on whether the RBI is convinced that inflation has come down and will remain at the current lower level.
Considering that there has been no new information that has come in on the domestic front and all the concerned economic variables are stable, prima facie, there is little reason to expect a further cut in rates. Unless, of course, the idea was to cut the rates by 50 bps in two tranches, the policy should be status quo.
There has been no significant external development as such, though the ECB has now committed to injecting liquidity for the next 18 months of the order of 1.1 trillion euros. This was actually known in advance though the ECB has now specifically mentioned the amount and the phasing of the same.
The Fed is expected to increase rates mid-2015 which is also a known action. The rupee has also been largely stable after the severe distortion caused by the Russian crisis, but not it appears that the market has already taken in this information.
There is little reason now to believe that the rupee will deviate widely from the range of 60-62/$. And given that there has been news of the RBI picking up dollars in the market; it does appear that this range looks comfortable for the central bank.
Therefore, the policy is likely to not radically change expectations and a further rate cut would be good for sentiment. Liquidity too is quite comfortable given that bank credit is yet to pick up and the government borrowing programme is very much under control.
Read more Click here / www.trade4x.net
On the face of it the answer is probably no, as the mid-term lowering of rates has set to rest speculation on whether the RBI is convinced that inflation has come down and will remain at the current lower level.
Considering that there has been no new information that has come in on the domestic front and all the concerned economic variables are stable, prima facie, there is little reason to expect a further cut in rates. Unless, of course, the idea was to cut the rates by 50 bps in two tranches, the policy should be status quo.
There has been no significant external development as such, though the ECB has now committed to injecting liquidity for the next 18 months of the order of 1.1 trillion euros. This was actually known in advance though the ECB has now specifically mentioned the amount and the phasing of the same.
The Fed is expected to increase rates mid-2015 which is also a known action. The rupee has also been largely stable after the severe distortion caused by the Russian crisis, but not it appears that the market has already taken in this information.
There is little reason now to believe that the rupee will deviate widely from the range of 60-62/$. And given that there has been news of the RBI picking up dollars in the market; it does appear that this range looks comfortable for the central bank.
Therefore, the policy is likely to not radically change expectations and a further rate cut would be good for sentiment. Liquidity too is quite comfortable given that bank credit is yet to pick up and the government borrowing programme is very much under control.
Read more Click here / www.trade4x.net
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