EMIs to Fall as RBI Cuts Lending Rate by 0.25%
- by Dan Gutierrez
- in Markets
- — Oct 5, 2016
Commending the maiden monetary policy announced by the new governor under the aegis of the recently constituted Monetary Policy Committee, Chandrajit Banerjee, Director General, CII stated that the 25 bps rate cut is very welcome by industry.
And it was the first monetary policy review since Urijit Patel joined in as RBI Governor. Dr Patel is joined by two Reserve Bank officials and three government nominated academics on monetary policy committee or MPC.
" RBI forecasts retail inflation to be 5 percent by March 2017 with upside risk". The bond market appeared to have already factored such a rate cut with yields of the 10-yer gilt having already moved over 20 basis points in the last few days to 6.77% pre-policy today and remaining flat post announcement. Rajan was rather vocal about the importance of reining in inflation and using interest rates as one way to do that.
The panel's projection on inflation was based on its reading that a strong improvement in sowing, along with supply-side management measures, will improve the food inflation outlook. "This has opened up space for policy action, as indicated in the third bi-monthly monetary policy statement", Patel said in the fourth bi-monthly monetary policy review for 2016-17.
"While the statement has not spelled out the timeline for attaining the 4 percent mid-point, the initial indications point to some flexibility around the time period for attainment of the mid-point", said Rajeev Radhakrishnan, head of fixed income at SBI Mutual Fund, India's fastest growing fund.
The above average rains have brought relief to millions of rural farmers who were reeling from two years of drought, helping to push inflation down to a five-year low in August.
Officials search for man who shot Spotsylvania Co. K-9
The passenger in the auto , Joseph Conway, 34, of King George County got out of the vehicle and got into a fight with the deputy. Pearce said police are urging residents not to confront the man, who police say is considered "armed and very unsafe ".
The market got what it wanted - a rate cut. The economy is still recovering at a slow pace and rate cut could spur private borrowing and spending.
Implementing the Goods and Services Tax (GST) could produce a short-lived pass-through impact on the inflation trajectory, the Reserve Bank of India (RBI) said on Tuesday.
According to Eon Electric Chairman and Managing Director V P Mahendru, the cut is Repo Rate will further provide momentum to manufacturing growth which has seen a dip in recent months.
However, by stoking demand in the economy the central bank could be making it harder to achieve its 4% inflation target.
A Reuters poll showed 26 of 44 analysts surveyed expect the committee to hold rates, while 16 see prospects for a 25 basis points cut.
Government, last week, for the second time this fiscal year had lowered the interest on small saving instruments like postal deposits, EPF and PPF and NSS by 1 bps to 8 per cent. "These measures should help in moderating the momentum of food inflation in the months ahead", it said.
