With inflation turning negative, industry has been demanding interest rate cuts to propel demand. However, RBI Governor D Subbarao had said there is no threat of deflation as food and crude oil prices are still firm.
Bonds slide on fears of sharper-than-expected policy rate hike.
Rapid depreciation of the rupee put us in a vicious spiral: D Subbarao
RBI wants to introduce these as an alternative to gold.
The policy guidance marks a clear shift in RBI's monetary policy stance towards addressing growth risks while not de-emphasising the objective of containing inflation
Reserve Bank Governor Raghuram Rajan on Tuesday again surprised the markets and raised the key policy rate by 0.25 per cent to 8 per cent in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for corporates.
Announced at the second-quarter review of monetary policy, the move would make transactions at automated teller machines and point of sale terminals (PoS or merchant terminals) more secure.
Central bank may raise the limit on repo borrowings or purchase more of govt bonds.
To first take a position that the currency would be managed, and then to witness it fall, is a grave loss of credibility for any government, and for any central bank.
The central bank has clearly signalled the conditions under which monetary easing would take place early this quarter. And, current conditions meets the RBI's paramters
At close, the Sensex ended up 359 points at 20,929 and the Nifty ended up 120 points at 6,221.
Rajan, who will complete a month as the governor of Reserve Bank of India on Friday has already succeeded in restoring calm in the foreign exchange market.
The finance ministry will have to rely on the weapons in its arsenal, since monetary policy is not providing the support.
RBI Governor Duvvuri Subbarao on Tuesday defended the bank's decision to keep the key policy rate unchanged saying inflation could rise to above 8 per cent in the near-term.
During the fourth quarter of last fiscal, the economy had grown at a nine-year low rate of 5.3 per cent. During the entire fiscal of 2011-12, the economy grew by 6.5 per cent.
Of the 15 participants, 7 expect CRR cut, only one sees repo rate reduction.
RBI had said last week it would continue with the monetary tightening till the inflation trajectory showed a downward trend.
The New Year could bring some cheer among bankers, as the Reserve Bank of India (RBI) is expected to start the rate easing cycle as early as January, during the third quarter review of monetary policy.
Sensex gained 359 points to close at 20,929 and the Nifty added 120 points to end at 6,221.
RBI expects more from the government than last week's very limited package of reforms and fiscal measures.
State Bank of India Chairman Pratip Chaudhuri again made a strong pitch for a reduction in banks' Cash Reserve Ratio (CRR) at the Reserve Bank's mid-quarter review of monetary policy scheduled September 7.
The Reserve Bank of India, in its first-quarter review of monetary policy, kept the benchmark policy rate constant at 8 per cent.
RBI's policy stance must address concerns over slowing output
At present, CRR, the portion of deposits which commercial banks keep with the central bank, stands at 6 per cent.
The 30-share Sensex provisionally ended at 15,485.40 down 351.07 points or 2.2% and the 50-share Nifty ended at 4,646.35 down 100 points or 2.1%.
The new rates would be effective from Friday.
The Reserve Bank of India chief also reviewed the high-level of inflation with the Finance Minister, ahead of the quarterly review of monetary policy next week, amidst expectations of another hike in key interest rates.
The Reserve bank of India has kept the repo rate and reverse repo rates unchanged in its mid-quarter review of monetary policy announced on Thursday.
The possibility of key policy rate cut is not bright as industrial output grew by 6.8 per cent in January against just 2.5 per cent in the previous month.
India Inc on Thursday expressed fear that the RBI's decision to raise key short-term rates will push up the cost of borrowing, making some of their projects unviable and hurting expansion plans.
This call comes even as both RBI as well as the government are fighting high inflation, driven by a massive jump in vegetable prices since mid-December with unseasonal rain affecting crops.
To consider revising interest rates after RBI's review.
With interest rates rising there are doubts if teaser rate home loans offered by banks will come to an abrupt halt.
Reserve Bank of India Governor D Subbarao on Friday increased mandatory cash reserve of banks held by RI by 75 basis points (0.75 per cent) in a bid to suck excess liquidity to combat rising inflation.
The RBI in its monetary policy review in October has revised the inflation forecast to 6.5 per cent by March-end from 5 per cent earlier.
Sadly, so will lending rates. Do not hurry to put all your money in existing offers.
High deposit rates may put pressure on teaser home loan rates
The central bank raised statutory liquidity ratio, the portion of deposits that banks are required to keep in government securities, by 100 basis points to 25 per cent. Other key rates were unchanged.
Economists are of the opinion that interest rates are likely to remain stable or moderate this year.
The recently released RBI First Quarter Review of Monetary Policy 2009-10 and the accompanying 'Macroeconomic and Monetary Developments First quarter review 2009-10 have indicated that on the basis of Balance of Payments (BoP) the export growth for 08-09 has declined by over 22% to 5.4% and also the import growth has declined by over 21% during the same period.
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