Skip to main content

In govt, bet is on a 50 bps rate reduction

By

'Accommodative Stance Must To Revive Sentiment'
Market players and economists may be betting on 25-basis-point (100bps 1 percentage point) rate cut by the RBI next week, but an influential section within the government believes that nothing less than a 50-bps reduc tion with an “accommodative“ stance will revive investment.
Differences between the RBI and the government over the extent of an interest rate cut have come out in the open in the past few months with the chief economic adviser in the finance ministry Arvind Subramanian expressing disappointment with the central bank's move not to cut rate as well as the monetary policy committee's (MPC) reading of the inflation situation.
Several private sector economists have also criticised MPC's inflation estimates. While efforts have been made to play down the differences, a wide gap in views between the central bank and the finance ministry over the direction of interest rates remains.
Multiple sources in the government told TOI that a small reduction in interest rate will not lead to step-up in growth and investment. They pointed to record low inflation to back their calls for a sharp reduction of at least 50bps when the central bank reviews monetary policy on August 1 and 2. They pointed out that the “pendulum“ has swung “overwhelmingly“ in favour of a sharp cut in rate, given the significant decline in inflationary pressure both on retail and wholesale prices.
The real cost of raising funds has gone up as inflation has slid to record lows.But economists said inflation rates are unlikely to stay at these levels. Sources said this is the best chance to “aggressively“ cut rates when the inflation rate is well below the central bank's comfort level and all available forecasts say they are expected to remain benign for now. Sources added that the central bank may have to clearly articulate its views on switching to an “accommodative“ stance in its statement. An accommodative stance means the prospect of a rate cut is high.
Times of India, New Delhi, 29th July 2017

Comments

Post a Comment

Popular posts from this blog

Data storage norm splits digital payments industry

By
Data storage norm splits digital payments industry  India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move.  In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET.  “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week.  RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...
18 comments
Read more

Offer’s for all of you

By
Great Bumper Dhamaka Offer’s for all of you... It's Time to see your Business Online, WebeCreator Offer Website Designing with domain & Email @ nominal charges. For a year For More information visit us http://goo.gl/KlpppF call on 9890151261/9773197533  drop a mail to sales@webecreator.com
Post a Comment
Read more

Sebi to finalise options in commodities today

By
The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...
17 comments
Read more