DBS India view on RBI Policy

Views of Radhika Rao, India Economist, DBS Bank - Policy announcement by Ho'ble RBI Governor Raghuram Rajan

"RBI's policy guidance was more balanced rather than as dovish as market expected going into today's decision. Inflation estimate for Mar17 was raised marginally, with the outlook also vulnerable to the upcoming increase in the public-sector wage bill. Meanwhile hurdles to further easing remain in place, which are uncertainty over the fiscal policy leaning (ahead of February's budget) and an impaired transmission mechanism which is not helped by the tighter liquidity conditions. The policymakers interpreted on-going liquidity squeeze as temporary/seasonal rather than structural, which saw policymakers leave the reserve ratios intact. In the post-policy comments, RBI Governor Rajan highlighted that the firm ten-year yields were not only a reflection of inflation concerns domestically but also elevated yields amongst the emerging market peers in light of external volatility".

Source : Equity Bulls

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