RBI likely to have status quo in monetary policy today
2 April 2014 4:30 AM IST
RBI has indicated earlier that its priority would be to rein in inflation, although India Inc has been pushing for cut in interest rates as a booster dose for economic growth.
In a bid to curb inflation, RBI in January raised the key repo rate by 0.25 per cent to 8 per cent.
Besides outlook on inflation, the central bank would also take into account the strengthening rupee and its impact on exports, Kidwai said.
Strengthening of the rupee against dollar in the past few days following inflow of foreign currency has put pressure on exports. In addition, unseasonal rains in March may end up stoking food inflation in the near term. RBI will on Tuesday announce the annual monetary policy for the financial year 2014-15.
‘In my view, RBI may go in for a pause this time,’ Federal Bank managing director Shyam Srinivasan said.
According to Punjab National Bank chairman and managing director KR Kamath, the RBI action will depend on outlook on inflation.
The annual rate of inflation, based on the monthly Wholesale Price Index, was 4.68 per cent in February. Retail inflation, based on the Consumer Price Index, was at 25-month low of 8.1 per cent.
Morgan Stanley said volatility in food prices and the base effect will result in CPI inflation going up to 8.5 per cent in the near term and cool off to 6.5 per cent by December.
‘We see risks emerging to the food inflation outlook due to the recent weather-related concerns prompted by unseasonal rain and hailstorms in some parts of the country,’ it said.
According to SBI’s economic research department, the present economic situation does not warrant any rate hike.
Raghuram Rajan, who took charge as Governor of the central bank last September, raised the rates during his first policy announcement, rightly foreseeing a pressure on the inflation front. He increased it again in January – for the third time since he took charge – when the market was expecting a pause.
Even though the RBI has not formally adopted inflation targeting, it has gone public on targeting CPI-based inflation down to 8 per cent by January 2015 and further down to 6 per cent by January 2016, as per the recommendations of the Patel committee.
Crisil sees no room for rate cut anytime soon
Mumbai: A day ahead of the Reserve Bank’s policy announcement, ratings agency Crisil on Monday hinted that RBI Governor Raghuram Rajan may go for a pause but said the central banker is far from a cut in rates because of the high retail inflation.
‘We may have come to the end of the interest rate tightening cycle. Rates, however, must remain on hold for now...No room for a rate cut anytime soon,’ Crisil said in a note.
The note said fall in retail inflation, which has declined from 11.2 per cent in November to 8.1 per cent in February, has been entirely driven by low vegetable prices, with hardly any downward adjustment in core CPI inflation.
As against the 3.1 percentage points fall in consumer price inflation during the three months, core CPI inflation has come down by only 0.1 per cent during this period.
Additionally, the data of the past eight years shows that there were supply side shocks on the food front for seven of those years in spite of the monsoon being normal.
‘Thus, while the shock to vegetable prices may have abated, the possibility of another idiosyncratic shock to food prices remains high, even if monsoons this year are normal and demand-side pressures remain relatively low,’ it said.
Rajan will announce the monetary policy tomorrow and expectations of a status quo are rising ever since the official data on consumer price inflation for February pointed to a cool down to 8.1 per cent.
Govt may further ease limits on gold import soon, says FM
New Delhi: Finance minister P Chidmabaram on Monday indicated that government may further ease restrictions on gold imports after Tuesday’s monetary policy by RBI as Current Account Deficit has moderated to about USD 35 billion.
‘Some relaxations were made a few days ago when more banks were allowed to import gold. We could consider some more relaxations in consultation with RBI,’ he said while releasing the year-end report on economy.
‘Let the RBI’s monetary policy be announced tomorrow and then we will consider whether some relaxation can be done,’ he said.
Emphasising that the economy today is far more stable and far stronger than what it was 20 months ago, he said, CAD is expected to come down about USD 35 billion during the current fiscal.
It was at a record high of USD 88.2 billion or 4.8 per cent of GDP as gold imports soared 845 tonnes last fiscal.
In order to restrict CAD, the government took measures to curb gold import. The government raised import duty on the precious metal three times taking it to 10 per cent and also made it mandatory to export 20 per cent of the total gold imported.
Following this gold imports came down to 19 tonnes in November from a peak of 162 tonnes in May. The CAD, too, was brought down to 3.1 per cent in April-September of current fiscal, from 4.5 per cent in the same period last year.
Gold imports have fallen substantially after the restrictions. Gold and silver imports declined 71.4 per cent to USD 1.63 billion in February.
Imports of gold and silver in February 2013 stood at USD 5.24 billion. In January this year, they were USD 1.72 billion.
Earlier this month, the RBI allowed more banks, including Axis Bank and Kotak Mahindra Bank to import gold under the 80:20 scheme.
In a bid to curb inflation, RBI in January raised the key repo rate by 0.25 per cent to 8 per cent.
Besides outlook on inflation, the central bank would also take into account the strengthening rupee and its impact on exports, Kidwai said.
Strengthening of the rupee against dollar in the past few days following inflow of foreign currency has put pressure on exports. In addition, unseasonal rains in March may end up stoking food inflation in the near term. RBI will on Tuesday announce the annual monetary policy for the financial year 2014-15.
‘In my view, RBI may go in for a pause this time,’ Federal Bank managing director Shyam Srinivasan said.
According to Punjab National Bank chairman and managing director KR Kamath, the RBI action will depend on outlook on inflation.
The annual rate of inflation, based on the monthly Wholesale Price Index, was 4.68 per cent in February. Retail inflation, based on the Consumer Price Index, was at 25-month low of 8.1 per cent.
Morgan Stanley said volatility in food prices and the base effect will result in CPI inflation going up to 8.5 per cent in the near term and cool off to 6.5 per cent by December.
‘We see risks emerging to the food inflation outlook due to the recent weather-related concerns prompted by unseasonal rain and hailstorms in some parts of the country,’ it said.
According to SBI’s economic research department, the present economic situation does not warrant any rate hike.
Raghuram Rajan, who took charge as Governor of the central bank last September, raised the rates during his first policy announcement, rightly foreseeing a pressure on the inflation front. He increased it again in January – for the third time since he took charge – when the market was expecting a pause.
Even though the RBI has not formally adopted inflation targeting, it has gone public on targeting CPI-based inflation down to 8 per cent by January 2015 and further down to 6 per cent by January 2016, as per the recommendations of the Patel committee.
Crisil sees no room for rate cut anytime soon
Mumbai: A day ahead of the Reserve Bank’s policy announcement, ratings agency Crisil on Monday hinted that RBI Governor Raghuram Rajan may go for a pause but said the central banker is far from a cut in rates because of the high retail inflation.
‘We may have come to the end of the interest rate tightening cycle. Rates, however, must remain on hold for now...No room for a rate cut anytime soon,’ Crisil said in a note.
The note said fall in retail inflation, which has declined from 11.2 per cent in November to 8.1 per cent in February, has been entirely driven by low vegetable prices, with hardly any downward adjustment in core CPI inflation.
As against the 3.1 percentage points fall in consumer price inflation during the three months, core CPI inflation has come down by only 0.1 per cent during this period.
Additionally, the data of the past eight years shows that there were supply side shocks on the food front for seven of those years in spite of the monsoon being normal.
‘Thus, while the shock to vegetable prices may have abated, the possibility of another idiosyncratic shock to food prices remains high, even if monsoons this year are normal and demand-side pressures remain relatively low,’ it said.
Rajan will announce the monetary policy tomorrow and expectations of a status quo are rising ever since the official data on consumer price inflation for February pointed to a cool down to 8.1 per cent.
Govt may further ease limits on gold import soon, says FM
New Delhi: Finance minister P Chidmabaram on Monday indicated that government may further ease restrictions on gold imports after Tuesday’s monetary policy by RBI as Current Account Deficit has moderated to about USD 35 billion.
‘Some relaxations were made a few days ago when more banks were allowed to import gold. We could consider some more relaxations in consultation with RBI,’ he said while releasing the year-end report on economy.
‘Let the RBI’s monetary policy be announced tomorrow and then we will consider whether some relaxation can be done,’ he said.
Emphasising that the economy today is far more stable and far stronger than what it was 20 months ago, he said, CAD is expected to come down about USD 35 billion during the current fiscal.
It was at a record high of USD 88.2 billion or 4.8 per cent of GDP as gold imports soared 845 tonnes last fiscal.
In order to restrict CAD, the government took measures to curb gold import. The government raised import duty on the precious metal three times taking it to 10 per cent and also made it mandatory to export 20 per cent of the total gold imported.
Following this gold imports came down to 19 tonnes in November from a peak of 162 tonnes in May. The CAD, too, was brought down to 3.1 per cent in April-September of current fiscal, from 4.5 per cent in the same period last year.
Gold imports have fallen substantially after the restrictions. Gold and silver imports declined 71.4 per cent to USD 1.63 billion in February.
Imports of gold and silver in February 2013 stood at USD 5.24 billion. In January this year, they were USD 1.72 billion.
Earlier this month, the RBI allowed more banks, including Axis Bank and Kotak Mahindra Bank to import gold under the 80:20 scheme.
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