Quote on Monetary Policy - Ms. Bekxy Kuriakose,
Head - Fixed Income, Principal MF
 |
| Ms. Bekxy Kuriakose, Head - Fixed Income, Principal MF |
“RBI MPC surprised market by keeping
key rates unchanged even while the stance remains unchanged as “accommodative”.
Important to also note that all members of MPC voted in favor of the decision.
I would term this policy decision as bold and perhaps a fallout of the “Onion
price” effect. However the RBI MPC has noted that food inflation has gone up
across several categories not just few and hence their concern is valid. Added
to it household inflation expectations have jumped up sharply across 3 month
and 12 month period. To some extent spending has remained subdued due to
increase in prices, the MPC notes in its policy document thereby acknowledging
the complex chain of cause and effect wart spending and inflation. The
RBI MPC also wants the full effect of past rate cuts of 135 bps to play out in
terms of transmission to bank lending rates which remains an area of disappointment.
Among the Developmental and Regulatory
Policies, much needed guidelines to regulate the functioning of Urban
Cooperative Banks will come in finally in the wake of the PMC crisis. This is a
welcome step.
Post policy announcement, gilt yields
have risen sharply. The ten yr benchmark yield is trading at 6.58% compared to
6.46% levels just prior to policy. We remain cautious on account of risk of
fiscal slippage and continuous supply of government bonds in the primary
market. Ample banking system liquidity will ensure money market rates remain
benign inspite of no rate cut. We would advise investors to stick to a balanced
asset allocation in debt funds.”
