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Friday, September 16, 2011

RBI hikes the policy rates

It was the 12th consecutive policy rate hike by the RBI, which raise the policy rates by 25 basis points.
RBI cleared its stance that it shall not take the inflation lightly, and shall continue to take the appropriate measures in future also.
Repo rate was hiked by 25 basis points to 8.25 % and as RBI has fixed the difference of 100 basis points between repo and reverse repo rate, repo rate automatically rose to 7.25%.
RBI kept the CRR untouched. Though this rate hike was much in the line with the market expectation, but Infrastructure and banking stocks took the beating along with the broader indices.
It is assumed that it shall be difficult for banks to pass this rate hike to customers as it shall affect the already slowing credit growth. NII (net interest income) of banks shall be reduced if banks fail to pass this hike to customers. To cut the oil under-recovery, yesterday government hiked the petrol price on the pretext of weaker rupee which makes import dearer, and in future government might come up with the hike in diesel and LPG prices too, which shall further increase the inflation. It shall be premature to assume that rates are peaked and shall fall in next 3-4 months.

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