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Third Quarter Review of Monetary Policy 2010-11 click here
Reactions from Assocham & ICRA on RBI 3rd Qtr Review of Monetary Policy 2010-11
RBI fires salvo to rein in Inflation-Growth to moderate- Assocham
Policy rates hike, both repo as well as reverse repo by 25 bps each with CRR remaining untouched, Mr. Dilip Modi President Assocham said that RBI has stepped in with calibrated force to rein in Inflation and anchor inflationary expectations without giving jerks to the growth momentum.He further added that the monetary policy is as per street expectations as any bigger steps by RBI could impact the growth trajectory which has shown consistency in the last few quarters.
Assocham appreciates the measured and balanced approach of RBI in containing inflation and moderating but not hampering growth which has already shown robust signs. The bank loans will again see increased interest rates . The step will also move banks in increasing deposit rates to improve deposit growth to take care of the expanded credit demand. However there is a case for credit monitoring by RBI to pre-empt any surprises.
RBI, being fully aware of the elevated inflation to continue, has increased projected inflation from 5.5% to 7% for the current fiscal year. The inflationary expectations in emerging markets and increase in commodity prices worldwide much before than expected has put RBI on extra guard to keep Inflation management in the shooting range as this will derail the growth momentum very drastically. In line with the market expectations as well as emerging global scenario with lack of capacity building domestically, there is bound to be demand side pressures and may keep the Inflation elevated.
Mr. Modi while appreciating the RBI matured steps taken by at this critical juncture with the twin responsibility to anchor inflation and sustain growth, are praiseworthy also emphasized that this must be supplemented by other measures to remove supply side constraints and capacity building to bridge demand supply gap.
Repo and Reverse Repo hiked by 25 bps each; slower than anticipated decline in inflation could trigger further rate action before March- ICRA
The RBI increased the Repo and Reverse Repo rates by 25 bps each to 6.50% and 5.50%,
respectively, with immediate effect, to
dampen the prevailing inflationary pressures
in the economy by containing inflationary
expectations. With WPI inflation remaining
considerably elevated despite repeated
monetary intervention by the RBI, economic
growth operating close to its trend, and a
robust credit growth outpacing the growth in
deposits, further increases in policy rates
cannot be ruled out before March 2011.
Since March 2010, the Repo and Reverse
Repo rates have been raised by 175 bps and
225 bps, respectively. Deposit and lending
rates have displayed an uptrend, following
the transmission of the hikes in the policy rates instituted by the RBI since March 2010. The
benchmark 10-year G-Sec rate has also hardened in December 2010 and January 2011 owing to the
prevailing tight liquidity conditions.
With inflationary pressures returning to the forefront, the policy measures undertaken by the RBI were
in line with expectations. With transient and structural factors imparting pressure to food inflation and
higher commodity prices expected to percolate into prices of non food manufactured products,
inflation is likely to decline at a moderate pace and remain the core policy concern for the RBI. In light
of the broadly robust growth outlook supported by healthy advance tax collections and improved bank
credit off-take, we expect that the RBI may persist with monetary tightening (including a further
increase in policy rates by 25 basis points before end-March 2011), while maintaining systemic
liquidity and interest rates at levels that can sustain economic growth.
Click Here For Press Statement by Dr. D. Subbarao, Governor on Third Quarter Review
Macroeconomic and Monetary Developments: Third Quarter Review 2010-11
...Click Here
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