Posted at 4:39 PM , on February 24, 2020
The MPC minutes announced by the RBI on 20th February showed consensus among the 6 members about the need to go slow on rate cuts. MPC has shown a clear preference for inflation control over boosting GDP growth.
Inflation is the worry
All the six members of the MPC were almost unanimous that sharply higher inflation was the real problem for the Indian economy. At 7.59% in Jan-20, CPI inflation leaves little room for any further rate cuts. Household inflation expectations are also tilting towards the higher side. Food inflation has always been sticky and the virus scare in China could only make oil prices more volatile. Inflation is already 150 basis points off the upper range allowed by the RBI and the MPC looks unlikely to cut rates till the time inflation moves below 4%.
Posted at 11:15 AM , on December 16, 2016
The RBI Monetary Policy Committee (MPC) will commence its 2-day meeting on 05th December which will conclude on 06th December. The outcome of the deliberations will be captured on December 07th in the form of the Monetary Policy. This policy becomes interesting in a variety of ways. Apart from the global circumstances under which this policy is being announced, the domestic liquidity shortfall will also be a significant factor. Continue reading
Posted at 4:44 PM , on October 14, 2016
Since the beginning of the calendar year the yield on 10-year G-Sec bonds has fallen from a high of 7.87% to the current level of 6.6%. The last time the 10-year G-Sec touched such a low level was back at the peak of the financial crisis in 2009 when central banks across the world were on a rate cutting spree to make adequate liquidity available at cheap rates. But, scratch the surface and the difference becomes a little more surprising. During the 2009 crisis, the repo rates were at a level of 4.75%. So the 10-year G-Sec yield at around the 6.5% level was perfectly understandable. But currently, the repo rates are at 6.25% (after the October monetary policy) but yields are already at the same level as 2009 when the repo rates were at 4.75%. So what exactly has driven this sharp fall in yields? Continue reading