Sponsored Links
The Reserve Bank of India is expected to start hiking its interest rates and the cash reserve ratio in January and take further steps to control capital inflow as the bank is concerned over asset inflation, Ramya Suryanarayanan, an economist at the Singapore-based DBS Bank wrote in a note on Wednesday. The economist anticipates a total increase of 150 basis points in interest rates between January and June of next year.
In its second quarter monetary policy review held on October 27, the RBI led by governor Duvvuri Subbarao, maintained the repo rate at 4.75%, the reverse repo at 3.25% and the CRR at 5%. The bank rate was retained at 6%. At the same time, it raised the statutory liquidity ratio for commercial banks to 25% from 24%.
In January, the RBI could start with a 25 basis points hike in repo, reverse repo rates and CRR, the economist said. During the period from January to December next year, CRR is expected to be hiked by at least 100 basis points to 150 basis points. Currently, further hikes in the statutory liquidity ratio is not expected, she wrote.
"We believe the decisions taken at the policy meeting say more about the RBI's intentions than its rhetoric," the DBS economist said. "Rate hikes from extremely accommodative levels naturally do not turn policy into a tight stance overnight. Therefore, for another quarter or two, the RBI can hike rates and still term its policy as accommodative."
Furthermore, the DBS economist said the RBI's concerns on asset price inflation could lead to measures to control capital inflow, especially debt capital flows such as external commercial borrowing. The limits on these borrowings were significantly liberalized in the past year in view of the tight liquidity conditions that prevailed in the aftermath of the collapse of Lehman Brothers, she noted.
"Some of these policy changes may be reversed and presented as action taken to preserve financial stability," the economist wrote.
0 komentar:
Post a Comment