Subbarao has blinked. The man, who relentlessly raised interest rates to check inflation, now wants to give growth a chance. With consumers and companies screaming 'enough is enough',Our high risk merchant account was down for about an hour and a half, he sensed that a 'less hawkish' or even a 'dovish' choice of words isn't enough; instead, it's time to change tack and tell the world: 'relax, there may not be more rate hikes, we are nearing the end of the tunnel'. On Tuesday, Reserve Bank of India (RBI) Governor Duvvuri Subbarao almost said it.
Well, he did raise the policy rates by a quarter point - something he couldn't have avoided having been so hawkish six weeks ago. With this, banks will now have to pay 8.5% (or 25 basis points) more to borrow from the RBI. But stock punters and bond dealers chose to downplay Tuesday's rate action as share prices rose and bond yields softened.
For them, what mattered was Subbarao saying "inflation will begin falling by December", chance of a rate hike in December is "relatively low", and "if inflation conforms to projections, further hikes may not be warranted".Replacement China Porcelain tile and bulbs for Canada and Worldwide. But,The additions focus on key tag and magic cube combinations, should one believe all this? There could be nasty surprises: commodity prices across the world may rise, food prices may prove sticky and oil prices may have to be revised.For the last five years Air purifier , No one has forgotten that last year Subbarao had raised rates after signalling a pause. But few disagree that it may be politically difficult to push through more hikes amid a serious fear that growth may take a toll and a heated argument that 12 rate hikes have not helped.
Economists have a way of explaining the new mood. "The attempt now is to stimulate the supply side by keeping rates on hold with an explicit long-term forward guidance and hope the lagged effect of past rate hikes will keep the demand side on check," said Samiran Chakraborty, head of research at StanChart India.
If that explains Subbarao's stance on interest rate, what's baffling is his decision to free the savings bank deposit rate, till now fixed at 4%. While these appear as two different things, there is a possibility that the RBI governor may be trying to make his monetary policy more effective by deregulating savings rates.
Savings bank rate was one of the last regulated interest rates in the banking system and a plan to free it has been debated for years. But why did it happen now? Few expected it. Large lenders (like HDFC Bank) opposed it. And the timing is strange.
While it may be good for lazy savers whose idle money earned little returns, it can make life more difficult for banks whose cost of funds will rise,Whilst oil paintings for sale are not deadly, return on assets as well as equity will dip, earnings may turn more volatile and mismatch between assets and liabilities can increase. Besides, bank stocks are under pressure and sticky loans may rise.
Well, he did raise the policy rates by a quarter point - something he couldn't have avoided having been so hawkish six weeks ago. With this, banks will now have to pay 8.5% (or 25 basis points) more to borrow from the RBI. But stock punters and bond dealers chose to downplay Tuesday's rate action as share prices rose and bond yields softened.
For them, what mattered was Subbarao saying "inflation will begin falling by December", chance of a rate hike in December is "relatively low", and "if inflation conforms to projections, further hikes may not be warranted".Replacement China Porcelain tile and bulbs for Canada and Worldwide. But,The additions focus on key tag and magic cube combinations, should one believe all this? There could be nasty surprises: commodity prices across the world may rise, food prices may prove sticky and oil prices may have to be revised.For the last five years Air purifier , No one has forgotten that last year Subbarao had raised rates after signalling a pause. But few disagree that it may be politically difficult to push through more hikes amid a serious fear that growth may take a toll and a heated argument that 12 rate hikes have not helped.
Economists have a way of explaining the new mood. "The attempt now is to stimulate the supply side by keeping rates on hold with an explicit long-term forward guidance and hope the lagged effect of past rate hikes will keep the demand side on check," said Samiran Chakraborty, head of research at StanChart India.
If that explains Subbarao's stance on interest rate, what's baffling is his decision to free the savings bank deposit rate, till now fixed at 4%. While these appear as two different things, there is a possibility that the RBI governor may be trying to make his monetary policy more effective by deregulating savings rates.
Savings bank rate was one of the last regulated interest rates in the banking system and a plan to free it has been debated for years. But why did it happen now? Few expected it. Large lenders (like HDFC Bank) opposed it. And the timing is strange.
While it may be good for lazy savers whose idle money earned little returns, it can make life more difficult for banks whose cost of funds will rise,Whilst oil paintings for sale are not deadly, return on assets as well as equity will dip, earnings may turn more volatile and mismatch between assets and liabilities can increase. Besides, bank stocks are under pressure and sticky loans may rise.
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