The Reserve Bank of India (RBI) is going to announce its fourth quarter (January March) credit policy on May 3. Speculations are rife that the central bank may cut the policy (repo) rate in the range of 25 50 basis points in a bid to revive the sputtering growth engine.
Repo is the rate at which banks borrow from RBI's daily borrowing window or known as LAF (Liquidity Adjustment Facility) in the banking parlance.
Sonal Varma and Aman Mohunta two economists from Japanese research firm Nomura are of opinion that the RBI may be prompted to cut rates due to three-pronged reasons: lower rate of wholesale price index (WPI) based inflation, weak growth and narrow trade deficit.
Here is what they had to say:
• A 25bp repo rate cut: We expect the RBI to cut its repo rate by 25bp to 7.25%, in line with consensus expectations. The RBI had stated in March that "headroom for further monetary easing remains quite limited." However, lower WPI inflation (80bp below the RBI's projection in March), continued weak growth and a narrower trade deficit should have collectively created space for further easing. Additionally, while a cut in the cash reserve ratio to allow for better policy transmission is possible, we do not consider this part of our base case scenario (Consensus and Nomura: 4.00%).
• Economic projections: We expect the RBI to project GDP growth at around 6% y-o-y in FY14 (year ending March 2014. up from 5.0% in FY13. Our forecast is for a lower 5.6%. We expect the RBI to project WPI inflation at between 5.5% and 6.0% y-o-y by March 2014 (6% in March 2013) on lower global commodity prices, a lagged impact of weaker demand and the forecast of a normal monsoon.
• Developmental and regulatory policies: We expect the RBI to announce a phased reduction in the hold-to-maturity (HTM) limit for banks from the current 25% to 23% (same as the statutory liquidity ratio). It could also tighten asset-quality norms for non-banking finance companies and on gold loans.
• Forward guidance: We expect the tone of forward guidance to shift from hawkish to neutral. We expect the RBI to signal that there is some scope for further rate cuts, but only contingent on signs of a sustainable moderation in CPI inflation and the current account deficit.
Outlook:
In our view, the global commodity price outlook is key to the trajectory of WPI inflation. A steady fall in global commodity prices, if sustained, would help ease input cost pressures and thus aid a further fall in WPI inflation in the coming months, providing the RBI even more headroom to cut rates (see: Asia Special Report: Lower commodity prices a boon for Asia, 19 April 2013).
Anda sedang membaca artikel tentang
A synopsis of what Nomura expects from RBI credit policy
Dengan url
http://gayafashionshow.blogspot.com/2013/04/a-synopsis-of-what-nomura-expects-from.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
A synopsis of what Nomura expects from RBI credit policy
namun jangan lupa untuk meletakkan link
A synopsis of what Nomura expects from RBI credit policy
sebagai sumbernya
0 komentar:
Posting Komentar