RBI Policy Preview - CRR cut: improbable, not impossible: Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

In the forthcoming quarterly monetary policy review, we expect a status quo on repo rate and assign low probability to a CRR cut. Further, we expect the central bank to lower its growth projection for FY12 towards 7% while maintaining a dovish tone overall. This expectation is based on the rationale that core inflation still remains elevated and a CRR cut cannot be undertaken exclusively to provide liquidity to the system as unlike OMOs, CRR is essentially a monetary tool (as RBI has stated on a number of occasions). Therefore the RBI may be more comfortable to continue injecting liquidity through OMOs and repos at LAF.

Nevertheless, the possibility of a CRR cut cannot be completely ruled out as growth has faltered more than expected and the impact of past rate actions is yet to be fully felt.  Indeed monetary conditions have tightened further amidst call money rates prevailing above repo rate in recent weeks.