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economy | IST

RBI monetary policy: Expect central bank to pause for next 6-9 months, says ICICI Bank's B Prasanna

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The Reserve Bank of India in its bi-monthly monetary policy left the repo rate and CRR unchanged but cut its inflation estimates sharply and also promised Rs 1.2 lakh crore more of OMO purchases.

The Reserve Bank of India in its bi-monthly monetary policy left the repo rate and CRR unchanged but cut its inflation estimates sharply and also promised Rs 1.2 lakh crore more of OMO purchases.
To analyse the policy statement further, CNBC-TV18 spoke to B Prasanna, head of global markets at ICICI Bank.
Prasanna said the bond market has been pleasantly surprised and fell post the policy and the 10-year bond yields are likely to fall further to 7.20-7.25 percent because inflation is expected to remain soft going forward.
With regards to the policy, he said, "The base call is still for a pause by the RBI over the next 6-9 months and so the house has not penciled in a rate cut in the base case. However, the RBI could change their stance in February policy."
“All this put together with a stable 6.50 percent repo rate and 10-year bond yields at 7.4-7.45 percent more than adequately compensates for interest rate structure,” said Prasanna.
Talking about the cut in SLR, he said, "For the system as a whole it is positive in an environment where credit is growing fast and deposit is able to match up with credit requirements. The banks will be able to offload excess SLR securities as and when credit demand is up and will be able to lend to the productive sectors of the economy."
 
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