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Banks: RBI monetary policy [Dipankar Choudhury]
The mid-quarter review of monetary policy by the Reserve Bank of India today was
as per our expectations, largely status quo-ist, and does not change the broad
outlook on the banking sector. The RBI exclusively devoted this review to liquidity
– the INR480bn of open market purchases of government bonds proposed by RBI
over the next month should provide some liquidity relief at the margin in the
present excessively tight environment. Ditto for the 1% cut in the Statutory
Liquidity Ratio ( SLR ). To that extent it will soften balance sheet pressure for
banks.
India Economics Weekly : Monetary policy, WPI inflation, summary of 2010
publications [Taimur Baig]
The Reserve Bank of India kept policy rates unchanged today, leaving the repo and
reverse repo rate at 6.25% and 5.25% respectively. In order to improve the
excessively tight liquidity conditions in the money market, the RBI announced two
measures: i) 1% permanent cut in the SLR (to 24%, effective from 18 December)
and ii) open market purchase of bonds (INR480bn) over the next one month. By
way of clarification, the RBI pointed out that "such provision of liquidity should not
be construed as a change in monetary policy stance since inflation continues to
remain a major concern."
Asia Economics Special: India:RBI pauses temporarily; to resume rate hike in
January [Taimur Baig]
The Reserve Bank of India kept policy rates unchanged today, leaving the repo and
reverse repo rate at 6.25% and 5.25% respectively. In order to improve the
excessively tight liquidity conditions in the money market, the RBI announced two
measures: i) 1% permanent cut in the SLR (to 24%, effective from 18 December)
and ii) open market purchase of bonds (INR480bn) over the next one month.
Meanwhile the CRR was kept unchanged at 6.0%. By way of clarification, the RBI
pointed out that "such provision of liquidity should not be construed as a change in
monetary policy stance since inflation continues to remain a major concern."
Commodities Weekly: Commodities Weekly [Michael Lewis]
After struggling for most of this year, commodity index returns are performing
strongly in the final quarter of 2010. We believe this strength has its origins in the
Fed's QE measures. However, physical fundamentals in many commodity markets
are also tightening suggesting price rallies are becoming based on more solid
foundations. Crude Oil: Over the next five years, we believe demand will grow 6-
7mmb/d and that non-OPEC supply will rise by only 3-4mmb/d. Spare crude
capacity in OPEC is likely to shrink in the absence of a strong ramp-up in Iraqi
production, in our view.
US Daily Economic Notes: Keep an eye on the LEI [Joseph LaVorgna]
Last Friday we learned that the November index of leading indicators registered an
impressive 1.1% month-on-month increase. This was the largest gain since March
of this year, when it rose 1.4%. While there were large contributions from the
yield curve and jobless claims; the breadth of the gains was impressive, as only
one of the ten subcomponents registered a negative reading. (Building permits
subtracted one-tenth from the headline gain.) We believe the broad-based gains
speak to the robust underlying momentum of the economy. While most of the
details of the LEI are already known at the time of release—new orders for
consumer goods and non-defense capital goods are estimated—movements in
the overall index are noteworthy because they are highly correlated with real GDP.
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