months, suggests limited downside to interest rates in the coming months.
With this policy, the RBI has clearly shifted its focus towards achieving a stated inflation goal over the next couple of years. The future course of monetary policy will now be determined by the forecasts of CPI inflation, the new nominal anchor. We expect CPI inflation to average 8.5% during 2014-15.
KSR Anjaneyulu, MD & CEO, Lakshmi Vilas Bank:
Notwithstanding the fact that Agriculture production during this year expected to be very robust, there is no alternative for RBI except to raise Repo rate to contain inflation caused by CPI Index particularly because of Service sector and Industrial sectors impact on inflation.
Though GDP growth is expected to be sub 5% level this year, Governor has taken decision to hike Repo rate to maintain Price Stability and to contain depreciation of Rupee which are the primary objectives of RBI. At the same time by not increasing CRR, RBI has also taken care of ensuring the availability of adequate liquidity to support the growth in the economy. Governor’s speech has given an indication that inflation is expected to be under control and there will not be any consequent further hike in Repo rate in near future. As a matter of policy MSF also be increased to 9% to maintain gap of 100 bps between Repo and MSF rates. Overall, it is a balanced approach being adopted by RBI.
Kunal Shah, Fund Manager - Debt, Kotak Mahindra Old Mutual Life Insurance Limited
RBI has hiked policy rates by 25bps as per the expectations, the stance has moved by a margin from growth concerns to worries on high core inflation. The move comes at the time when bond markets were stuck with volatile macro variables and new framework proposed by deputy Governor. RBI has indicated that at current level of repo rate they are comfortable to guide the system that as per their forecast of inflation for next 12months monetary stance will remain unchanged, RBI also indicated that if inflation drops below their expected path they may even ease in future. For bond markets this will be