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March 4, 2015

Update : RBI Cuts Policy Rates
Update on RBI Governor's statement on Monetary Policy released on March 4, 2015.

by iFAST Investment Advisory Division

 RBI Policy Note- Jan15

On January 15, 2015, while reducing the repo rate by 25 basis points to 7.75%, the  RBI Governor had indicated in his statement on Monetary Policy that “Key to further easing are data that confirm continuing disinflationary pressures. Also critical would be sustained high quality fiscal consolidation…”

In a statement on Monetary Policy released today (March 04, 2015), the Governor has reduced the repo rate under the Liquidity Adjustment Facility (LAF) further by 25 basis points to 7.5%. Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect.

The Governor’s views on the policy stance released today read as follows:

“Softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation. “

Our Take

Our advice to moderately aggressive and aggressive investors is to continue taking an exposure into dynamic bond funds/income funds with a time horizon of 2 years.


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