Motilal Oswal, CMD, Motilal Oswal Financial Services Ltd is not exactly enthused by RBI's latest monetary policy. He says:
"RBI eased CRR to help the liquidity situation that has shown first signs of stress at the beginning of the busy season. However, it missed another occasion to ease policy rates and build momentum around the slew of measures announced by government that included a fiscal consolidation roadmap for the 12th Plan period. While liquidity has been accorded top priority, relatively smaller magnitude of CRR cut, no announcement of open market operations (OMOs) and scaling down of monetary projections by 1% point to continued tight liquidity condition going forward. If however, RBI conducts ad hoc OMOs to ease liquidity then it can still infuse a downward bias to interest rates that would help the market and the economy.
"RBI’s downward revision of growth estimate was on expected line. However, it also has upped its end-March 2012 inflation projection. Thus it has taken a view that growth inflation mix possibly stood where it was explaining no change in rates. However, going forward inflation may moderate as QE3 failed to create the commodity run that its earlier rounds did. Domestically also the price pressures from food are expected to ease while inflationary expectations are coming down. While all these find mention in the review of the economy published a day before, it seems rate cut would have to await longer than expected earlier."
