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2 Dec 2014
RBI keep rates unchanged but signals willingness to ease in 2015 – TDS
FXStreet (Barcelona) - The TD Securities Research Team note that the Reserve Bank of India (RBI) kept the LAF and CRR rates unchanged, in line with the market expectations, with the willingness to ease in 2015.
Key Quotes
“In line with the almost unanimous consensus expectations and our forecast, the RBI kept the policy repo rate under the Liquidity Adjustment Facility (LAF) and the CRR unchanged at 8.00% and 4.00%, respectively, today.”
“In its assessment of the global economy, the RBI acknowledged a slowdown since the September bi-monthly monetary policy statement. But also recognized that the sharp fall in oil prices, if sustained, “will have a net positive impact on global growth.””
“The RBI recognizes that “Some easing of monetary conditions has already taken place” through the substantial moderation of the weighted average call rates and long-term yields for government and high-quality corporate issuances.”
“The RBI mentioned that “weak demand and the rapid pace of recent disinflation are factors supporting monetary accommodation,” suggesting that an explicit change in monetary policy stance is warranted in the future, but such change “at the current juncture is [still] premature.””
“Therefore, “if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.”“
“In this respect, November CPI, due sometime around mid-December, is expected to decline further on still favourable base effects. However, the December inflation, due mid-January, is likely to rise and set CPI on an upward trajectory after the benign developments observed for most of 2014. If these moves do not threaten the achievement of the January 2016 target of 6%, the RBI will ease.”
Key Quotes
“In line with the almost unanimous consensus expectations and our forecast, the RBI kept the policy repo rate under the Liquidity Adjustment Facility (LAF) and the CRR unchanged at 8.00% and 4.00%, respectively, today.”
“In its assessment of the global economy, the RBI acknowledged a slowdown since the September bi-monthly monetary policy statement. But also recognized that the sharp fall in oil prices, if sustained, “will have a net positive impact on global growth.””
“The RBI recognizes that “Some easing of monetary conditions has already taken place” through the substantial moderation of the weighted average call rates and long-term yields for government and high-quality corporate issuances.”
“The RBI mentioned that “weak demand and the rapid pace of recent disinflation are factors supporting monetary accommodation,” suggesting that an explicit change in monetary policy stance is warranted in the future, but such change “at the current juncture is [still] premature.””
“Therefore, “if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.”“
“In this respect, November CPI, due sometime around mid-December, is expected to decline further on still favourable base effects. However, the December inflation, due mid-January, is likely to rise and set CPI on an upward trajectory after the benign developments observed for most of 2014. If these moves do not threaten the achievement of the January 2016 target of 6%, the RBI will ease.”