Published on Mon, Mar 22, 2010 at 10:51 | Source : Moneycontrol.com
Updated at Tue, Mar 23, 2010 at 08:08
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Expect more shocks in April from RBI: Experts
Market veterans including Anantha Narayan of Standard Chartered Bank and Rajeev Malik of Macquarie Capital Securities see a 25-50 bps hike in the April policy.
The RBI's two-page press note announcing the rate hike had the word inflation writ large in every line. The central bank had pointed out that food prices, despite some moderation in the last few weeks remain at an elevated 16%; the consumer price indices have been rising in recent months.
The second reason for the hike is the robust recovery numbers. Industrial output grew at 17.6% in December and at 16.7% in January. In addition a 39% rise in capital goods in December and a 56% rise in January show that investment activity has revived.
However, Malik feels that political pressures could have prompted the surprise rate hike.
An increase in the repo and reserve repo rates signals an increase in interest rates. In January, The central Bank had raised CRR by 75 bps. The repo rate and the reverse repor rate were last hiked in July 2008 (by 50 bps) and June 2006 (by 25 bps), respectively.
