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RBI Leaves Rates Unchanged


In a very boring macroeconomic note (mid quarter review, March 2012) the RBI decided not to change anything, and wait and watch. They had recently reduced the Cash Reserve Ratio by 0.75%.

Important was this statement:

On the domestic front, while most indicators suggest that the economy is slowing down, the performance in Q4 of 2011-12 is expected to be better than that in Q3. Inflation has broadly evolved along the projected trajectory so far. However, upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation. Besides, there continues to be significant suppressed inflation in fuel, fertilizer and power as administered prices do not fully reflect the costs of production.

Market reactions:

– Bank stocks fell nearly 3% today intraday. The Nifty was down 1.5%.

– Bond yields went immediately up to 8.35% (they have been 8.20% recently).

– The Repo Offtake has been above 1.25 lakh cr. since the CRR cut (was over 1.8 lakh cr earlier) which seems to not have changed.

– The budget’s tomorrow, so everyone will wait for that instead for direction.

Next review’s in late April 2012. It’s likely that rates are lowered then.


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