Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI Monetary Policy Preview – Expect a 25bp hike in repo rate
The Reserve Bank of India (RBI) will be conducting the mid-quarter review of its monetary
policy today. The RBI in its previous policy review had surprised the street by raising the
repo rate by 50bp as against consensus expectations of 25bp. We expect the RBI to carry
out a final hike of 25bp in repo rate for the current interest rate cycle. The street consensus
is also for a 25bp hike.
Though the moderation in growth has become more evident of late, headline inflation has
remained sticky above 9% levels for the last nine months. In fact, the latest inflation
reading accelerated to a 13-month high, approaching double digit. Core inflation (nonfood
manufacturing) – the variable that the RBI tracks closely – for August 2011
accelerated to 7.8% from 7.5% a month ago. Hence, we expect a 25bp repo rate hike in
the policy review today.
However, post the expected hike today, we expect the RBI to take a pause, as rising global
growth concerns and declining fiscal stimulus measures in developed economies (on
concerns of expanding fiscal deficits and unsustainable public debt to GDP) are likely to
keep commodity and energy prices in check at least in the short term. Moreover, with signs
of a slowdown on the domestic growth front, evident from slowing GDP growth rates, tepid
IIP growth, moderating trend in PMI, declining vehicle sales and cement dispatches growth
rates, we believe policy rates are close to their peak of the current interest rate cycle.
Hence, apart from the actual rate action, in our view the markets would also be looking for
hints of any softening in the RBI’s stance that suggest that due to the global headwinds to
growth, the RBI may look to pause after the current policy action.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI Monetary Policy Preview – Expect a 25bp hike in repo rate
The Reserve Bank of India (RBI) will be conducting the mid-quarter review of its monetary
policy today. The RBI in its previous policy review had surprised the street by raising the
repo rate by 50bp as against consensus expectations of 25bp. We expect the RBI to carry
out a final hike of 25bp in repo rate for the current interest rate cycle. The street consensus
is also for a 25bp hike.
Though the moderation in growth has become more evident of late, headline inflation has
remained sticky above 9% levels for the last nine months. In fact, the latest inflation
reading accelerated to a 13-month high, approaching double digit. Core inflation (nonfood
manufacturing) – the variable that the RBI tracks closely – for August 2011
accelerated to 7.8% from 7.5% a month ago. Hence, we expect a 25bp repo rate hike in
the policy review today.
However, post the expected hike today, we expect the RBI to take a pause, as rising global
growth concerns and declining fiscal stimulus measures in developed economies (on
concerns of expanding fiscal deficits and unsustainable public debt to GDP) are likely to
keep commodity and energy prices in check at least in the short term. Moreover, with signs
of a slowdown on the domestic growth front, evident from slowing GDP growth rates, tepid
IIP growth, moderating trend in PMI, declining vehicle sales and cement dispatches growth
rates, we believe policy rates are close to their peak of the current interest rate cycle.
Hence, apart from the actual rate action, in our view the markets would also be looking for
hints of any softening in the RBI’s stance that suggest that due to the global headwinds to
growth, the RBI may look to pause after the current policy action.
No comments:
Post a Comment