Monetary Policy: RBI keeps policy rates, CRR unchanged
Key Highlights:
- RBI left policy rates and CRR unchanged. A moderate surprise was a 100bp reduction in SLR to 23%.
- FY13 growth estimate was lowered to 6.5% from 7.3% earlier while Mar-13 inflation estimate was revised up to 7% from 6.5% earlier. Monetary projections were left unchanged.
- Policy stance retreated to accord highest priority to inflation control followed by growth and liquidity. This contrasts with the Apr-12 policy where the first two priorities were altered.
- The guidance remained hawkish and made any easing conditional on fiscal progress and contingent upon unexpected deterioration of global situation.
- The moderate surprise was on account of SLR cut which is unlikely to be effective at this juncture with banks holding 4% excess SLR and outlook for credit growth and quality muted.
- Monetary policy seems ineffective for now as (1) High policy rates have had little impact on inflation, and (2) Onus of both growth and inflation lies on the government. Still, we believe, RBI needs to be more flexible in its approach in tackling the growth-inflation dilemma.
- Motilal Oswal believes that evolving growth-inflation situation increases the probability of a rate cut in coming policy events.
- RBI left policy rates and CRR unchanged. A moderate surprise was a 100bp reduction in SLR to 23%.
- FY13 growth estimate was lowered to 6.5% from 7.3% earlier while Mar-13 inflation estimate was revised up to 7% from 6.5% earlier. Monetary projections were left unchanged.
- Policy stance retreated to accord highest priority to inflation control followed by growth and liquidity. This contrasts with the Apr-12 policy where the first two priorities were altered.
- The guidance remained hawkish and made any easing conditional on fiscal progress and contingent upon unexpected deterioration of global situation.
- The moderate surprise was on account of SLR cut which is unlikely to be effective at this juncture with banks holding 4% excess SLR and outlook for credit growth and quality muted.
- Monetary policy seems ineffective for now as (1) High policy rates have had little impact on inflation, and (2) Onus of both growth and inflation lies on the government. Still, we believe, RBI needs to be more flexible in its approach in tackling the growth-inflation dilemma.
- Motilal Oswal believes that evolving growth-inflation situation increases the probability of a rate cut in coming policy events.
Click here to read the full reportWorld News
Other Articles
- Note on RBI's Monetary Policy Announcement for 2013-14
- RBI'S Credit Poilcy: Repo Rate reduced to 7.25%, other key rates unchanged
- RBI cuts Repo rate by 25bp; No measures on liquidity; cautionary guidance
- RBI slashes Repo rate by 25 BPS to 7.25 percent
- RBI and the repo rate - scope for optimism?
Featured Author
 |
Motilal Oswal |
- Macroeconomic indicators & Stock markets
- Midcap/Smallcap Indices - Time to catch up and stop under performing?
- MF Scheme Analysis: Franklin India Bluechip Fund (G)
- Note on RBI's Monetary Policy Announcement for 2013-14
- South Indian Bank Q3FY13: Results in line with expectations, retain accumulate More
Also On Valuenotes.Com
Personal Finance
The Art and Science of Buying Life InsuranceInvest early in your careerKnow your PAN card betterStock Recommendation
SBI Q4FY13: Mixed set of numbers, Margins shrink, Asset quality improvesBHEL Q4FY13: Reported PAT ahead of provisional numbersDish TV Q4FY13: Performance below expectation, well placed to capitalize on digitizationMarket Outlook
Week ahead: Nifty surging higher, the bulls remain in controlDow Theory: A tool for technical analystsEquity markets witnessed a choppy session of trade
Reader's Comments
Discussion
23rd May 2013 | 07:26 am
Economy : Rupee falls to over 8-1/2 month low on global dollar strength
22nd May 2013 | 08:34 pm
Economy : SELL MCX CRUDE OIL (JUNE) TARGET ACHIEVED