Reserve Bank of India (RBI) will be unveiling the much awaited first quarter review of annual monetary and credit policy on July 31, 2007. The market seems to be unanimously agreeing that the central bank will maintain status quo as far as benchmark rates (reverse repo and repo rates) are concerned. RBI is likely to shift its focus from inflation management to liquidity and exchange rate management in the review.
Stock broking firm, Sharekhan is of the view that with inflation down below 4.5% and the annual credit growth moderating to 24%, the RBI is much more comfortably placed than it was in the previous couple of quarters and consequently it will hold policy rates at the current level. Thus they feel that the monetary policy's focus is likely to shift from inflation management to liquidity and exchange rate management, as the current high annual growth of above 21% in the money supply continues to be above the central bank's comfort zone. However, they further added that market estimates suggest that there exists a 10% chance of the cash reserve ratio (CRR) being increased by 50 basis points in the upcoming policy review meet.
It seems unlikely and the RBI is expected to reiterate its ‘cautious’ stance, as the macro environment remains challenging with forex inflows continuing unabated and oil prices remaining on the boil. The RBI may well leave it to the banks to work down the money market surpluses through their balance sheets, says Enam Securities.
GS Global Economic Website is of the view that the significant policy tightening since September 2006, has moderated credit growth in line with RBI expectations. Further they anticipate measures to reduce liquidity like raising the ceiling on sterilization and an increase in the daily liquidity withdrawn through the reverse repo window. They are of the opinion that RBI may use administrative measures to limit capital inflows and banks may reduce lending rates on the back of an unchanged RBI interest rate policy.
Stock broking firm, Sharekhan is of the view that with inflation down below 4.5% and the annual credit growth moderating to 24%, the RBI is much more comfortably placed than it was in the previous couple of quarters and consequently it will hold policy rates at the current level. Thus they feel that the monetary policy's focus is likely to shift from inflation management to liquidity and exchange rate management, as the current high annual growth of above 21% in the money supply continues to be above the central bank's comfort zone. However, they further added that market estimates suggest that there exists a 10% chance of the cash reserve ratio (CRR) being increased by 50 basis points in the upcoming policy review meet.
It seems unlikely and the RBI is expected to reiterate its ‘cautious’ stance, as the macro environment remains challenging with forex inflows continuing unabated and oil prices remaining on the boil. The RBI may well leave it to the banks to work down the money market surpluses through their balance sheets, says Enam Securities.
GS Global Economic Website is of the view that the significant policy tightening since September 2006, has moderated credit growth in line with RBI expectations. Further they anticipate measures to reduce liquidity like raising the ceiling on sterilization and an increase in the daily liquidity withdrawn through the reverse repo window. They are of the opinion that RBI may use administrative measures to limit capital inflows and banks may reduce lending rates on the back of an unchanged RBI interest rate policy.
No comments:
Post a Comment