Are policy makers under the US spell?

Posted: 2008-01-28 23:45:13+05:30 IST
Updated: Jan 28, 2008 at 0001 hrs IST

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the inflation front. Besides, the FII inflows is again not likely to push up the rupee as it appears they are more than likely to either exit or have limited exposures in domestic bourses no matter what opportunites emerging economies offer.

Therefore, the RBI, perhaps, is in a comfortable zone to test the waters and bring down the corridor rate differential by at least 25 bps, if not 50 bps.

With the government pressure to bring about a feel-good factor, there is more likelihood of the RBI tinkering with corridor differential that is currently at 1.75%.

Having said so, another pointer towards lowering interest rates is the government bond benchmark rate, which has, in a week’s time, lost 14 bps. The benchmark ten-year bond, 7.99% of 2017, has dropped from 7.54% to 7.4% on Thursday. This primarily because of the rising demand for government bonds by financial institutions after the recent spate of events that has made equities riskier. Domestic financial institutions, mutual funds, banks and insurance companies have already begun shuffling their portfolios, their weightages are more toward risk-free government bonds. So is the time ripe to infuse some liquidity?...