homeeconomy NewsRBI likely to hold interest rates in December policy, says Soumya Kanti Ghosh of SBI
RBI likely to hold interest rates in December policy, says Soumya Kanti Ghosh of SBI
Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership and Soumya Kanti Ghosh, group chief economic advisor at State Bank of India (SBI) shared their views on the current liquidity situation and selling in the bond market.
The liquidity battle between the government and the Reserve Bank of India (RBI) continues to make headlines, with the government claiming that liquidity constraints are crimping growth while the central bank believes credit growth remains healthy.
Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership and Soumya Kanti Ghosh, group chief economic advisor at State Bank of India (SBI) shared their views on the current liquidity situation and selling in the bond market.
“I think the RBI will hold the rates because these talks of a rate hike or a rate cut within a span of a couple of months creates a lot of uncertainty in the market and the central bank will stick to its path because the oil prices movement still looks uncertain even though it has dropped below USD 60 per barrel,” said Ghosh.
The RBI will unveil its fifth bi-monthly monetary policy statement on December 5.
Talking about the selling in the bond market, Ghosh said, “I think the yields are expected to go down and I will not be surprised if it moves below 7.70 today because the movements in the yields in the last couple of days has been dictated by a lot of selling in the market. So basically that is why the yields have moved up."
"I believe that once there is a clear picture of what the Organization of the Petroleum Exporting Countries (OPEC) does and the fact that the open market operation (OMO) – Rs 40,000 crore has been announced in December and possibly there will be more in the next one-two months, I think the yields should substantially move down from the current levels. There is a possibility that the yields could touch 7.60 and it could even go lower," added Ghosh.
The Organisation of the Petroleum Exporting Countries (OPEC) will meet at its headquarters in Vienna, Austria, on December 6 to discuss output policy.
With regards to the liquidity scenario in the banking system, Upadhyay said, “Liquidity situation continues to be tight. OMOs were expected. There was an element of surprise in RBI’s announcement yesterday. While the OMO calendar for the month of November had expired, they still chose to go ahead and announce another OMO for this month, which is Rs 10,000 crore scheduled for this week. In addition to that, we have the OMOs for December. So this would soothe market nerves. "
First Published: Nov 28, 2018 11:07 AM IST
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