Views on Monetary Policy - Anita Gandhi, Whole Time Director at Arihant Capital Markets

In its last policy review in August, the RBI had reduced the repo rate by 0.25 per cent to 6 per cent, citing reduction in inflation risks. The rate cut was the first in 10 months and brought the policy rates to a near 7-year low. However, retail inflation rose to a five-month high of 3.36 per cent in August due to costlier vegetables and fruits. Consumer price index (CPI)-based inflation was 2.36 per cent in July.

Following are the highlights of RBI's fourth bi-monthly monetary policy statement for 2017-18:

- Repo rate unchanged at 6%
- Reverse repo remains unchanged at 5.75%
- SLR cut by 50 bps to 19.50% from Oct 14 fortnight
- Bank Rate, MSF stays unchanged at 6.25%
- HTM limit to be cut to 19.5% in phases
- HTM limit to be cut to 20% by Dec 31
- HTM limit to be cut to 19.50% by Mar 31
- CPI seen 4.2-4.6% in Oct-Mar
- Next meeting on Dec 5-6

Since CPI has shown uptrend, RBI has appropriately deferred rate cut. Reduction in SLR by 50 bps to 19.5% in from Oct, 14 midnight will release some liquidity in the market. Equity market has taken the policy

Source : Equity Bulls

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