It’s Rajan’s Day today


Mumbai: Amidst the euphoria created by the US Federal Reserve’s decision to continue with the quantitative easing programme without a timeline, the government has advised caution while the banks are expecting the new RBI governor Raghuram Rajan to ease the liquidity tightening measures.
Rajan, who announces his maiden credit policy review on Friday, has to battle the 6.1 per cent inflation and sagging industrial production numbers. Ganti Murthy, head, fixed income at IDBI Mutual, said: “Keeping in view the US Fed’s moves, the RBI would be forced to opt for some measures.
“The basic measures banks are asking for are reduction in the daily CRR maintenance levels from the current 99 per cent and a partial cut in the marginal standing facility (MSF) rates,” he said SBI chairman Pratip Chaudhuri said they have recommended a cut in CRR, repo rate and asked RBI not to restrict the MSF to a particular number. Whatever excess SLR banks hold that should be available for MSF.
However rating agency Crisil’s chief economist D.K.Joshi said he did not expect any change in the key interest rate on Friday but Bank of America Merill Lynch said in a report that they “expect a relaxation in Liquidity Adjustment Facility (LAF) limit to one per cent from the current 0.5 per cent.”
Meanwhile, economic affairs secretary Arvind Mayaram in a reference to the US Fed’s decision said: “We should not overly put emphasis on the decisions of the Fed in the manner in which the economy will unfold... It is  business as usual for us, as far as we are concerned.”
He said the government would continue to deepen the reform process so that the economy is strengthened. Experts, however, advise emerging markets to get its act together. “The window will not be open for long: the Fed still thinks it will be done with QE by mid-2014 and tapering has probably been postponed by only three months,” HSBC co-head of Asian Economics Research Frederic Neumann said.
According to HSBC, “To avoid another rough summer, policy-makers in Asia will need to use this brief window to implement structural reforms to put Asian growth on a more sustainable path. That would make for a true bull market.”

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