RBI actions were predictable n predicted atleast for this time around...
RBI has tinkered wit two of the liquidity management tools..
1. has removed the reverse repo cap of Rs 3000 crore - Will certainly lead to rise in call rates as banks now have an option to park more money with the central bank...
2. Hiked CRR by 50bps - will not lead to rise in interest rates as the system is flush with liquidity...
Unanswered questions
1. Will the RBI let the rupee appreciate or will it intervene to keep Re above 40 levels
2. Will it sterlize the intervantion n if it does wat will be the tools used.
3. Will the central bank allow further liberalization on the current account front...
With RBI being consistantly inconsistant with multiple objectives n conflicting interest... the central bank has to have a broad policy framework than resortin to quick fixes... Ajay Shah rightly says that RBI, instead of minimizing risk has become a risk factor itself.....
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