Experts cheer RBI’s policy decision to keep rates unchanged

Even as RBI policy rate decision for the fifth Bi-Monthly Monetary Policy has surprised several of the market participants the decision seems to be a bold one and applied after taking into consideration several of the factors including global factors.

According to Murthy Nagarajan, head - Fixed Income, Quantum AMC , “A superb move by the RBI and MPC to not cut the repo rate. There were questions being raised on the RBI’s independence and Dr. Patel’s silence on the demonetisation issue, but with this non-consensus move of holding rates steady, we believe the RBI has made a big statement towards its independence and objectivity”.

Clearly RBI would like to study the effects of demonetisation before taking any major decision on rate cut.

“Belying market expectations, RBI decided to keep key rates unchanged. Bond markets have expectedly reacted negatively given that 25 bps was already factored in with some segments even expecting 50 bps rate cut. RBI has clearly specified they need data and more time to evaluate the effects of demonetisation and clearly do not wish to react disproportionately to “short term transient” effects. ” said Bekxy Kuriakose, head – Fixed Income, Principal PNB Asset Management.

It overall looks like a good decision from the Reserve Bank where the governor has not made a hasty decision and has decided to wait for further developments.