RBI's Monetary Policy - Aneesh Srivastava, CIO - IDBI Federal life

Aneesh Srivastava, CIO - IDBI Federal life

"The RBI cut interest rates on Tuesday for the first time in three years by 50 basis points to provide encouragement to the sagging economic growth. However, RBI warned that there is not much scope for further rate cuts. The Reserve Bank of India cut its policy repo rate to 8.00% compared with expectations for a 25 basis point cut in a Reuters' poll.

Mr. Aneesh Srivastava, Chief Investment Officer, IDBI Federal Life Insurance Co Ltd, said, "The fact that RBI has cut interest rates by 50 basis points is a positive sign. By doing this, RBI has started the rate reversal cycle after many years. I believe that the rate cuts should be supported by liquidity for effective transmission of lower interest rates in economy. Inflation levels have come and are expected to remain low in next 3-6 months time. At the same time economic growth trajectory will remain soft. Growth rate is below trend, and there is further scope to boost output by cutting rates.

I expect crude oil and commodity prices to come down in slowing global economic environment. Some correction is already seen there.

The RBI has raised the borrowing limit of scheduled commercial banks under the marginal standing facility (MSF) to 2% of their deposits from 1% to ease liquidity in the market. This would support banks in liquidity management."

Source : Equity Bulls

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