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RBI Mid-Quarter Monetary Policy Review
RBI hikes repo, reverse repo rates by 25bp each: The RBI’s stance of a 25bp hike in both
the repo and reverse repo rates in the last monetary policy (January 25, 2011) was to
contain the spillover of high food and fuel inflation into generalised inflation. While food
inflation has moderated from the highs of 18.32% to 9.42% in the last two months, core
manufacturing inflation (excluding food products) has risen to 6.15%, the highest in the
last 29 months, implying that incrementally non-food inflation is becoming a larger
contributor to inflation. Also, global macro uncertainties are expected to keep commodity
and crude prices volatile in the near term. Although performance of capital goods in IIP
has been weak in the last two months, the RBI has pointed out that positive data from other
economic indicators such as PMI, direct and indirect tax collections, merchandise exports
and bank credit indicate that the growth momentum persists. Thus, with growth forecasts
intact and demand-side pressures persisting in the economy, the current 25bp hike in both
the repo and reverse repo rates seems justified.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI Mid-Quarter Monetary Policy Review
RBI hikes repo, reverse repo rates by 25bp each: The RBI’s stance of a 25bp hike in both
the repo and reverse repo rates in the last monetary policy (January 25, 2011) was to
contain the spillover of high food and fuel inflation into generalised inflation. While food
inflation has moderated from the highs of 18.32% to 9.42% in the last two months, core
manufacturing inflation (excluding food products) has risen to 6.15%, the highest in the
last 29 months, implying that incrementally non-food inflation is becoming a larger
contributor to inflation. Also, global macro uncertainties are expected to keep commodity
and crude prices volatile in the near term. Although performance of capital goods in IIP
has been weak in the last two months, the RBI has pointed out that positive data from other
economic indicators such as PMI, direct and indirect tax collections, merchandise exports
and bank credit indicate that the growth momentum persists. Thus, with growth forecasts
intact and demand-side pressures persisting in the economy, the current 25bp hike in both
the repo and reverse repo rates seems justified.
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