Monetary Policies Across The Globe Set To Focus On Growth

Most of the indices in the world are trading at their peaks. There is a sense of confidence in the world market which is clearly reflecting in their respective indices. Further, the market is also pushed higher by the monetary policy in countries which have focused on growth. The world has seen good action from the central banks of the respective countries like Japan, England and the European Central Bank.

The European Central Bank (ECB), yesterday, left the benchmark rates unchanged at 0.75%. According to media reports, Mario Draghi, President of ECB said that the eurozone is stabilising and that a gradual recovery should start in the second half of the year. The market participants were expecting a status quo from the ECB President. However, his statement which said that growth will pick up in the later part of the year generated a sense of confidence among the investors. The Bank of England also took a similar stand of keeping the rates unchanged at 0.50% and continued with its stimulus programme which would boost overall UK's overall economy. There had been news that Bank of England may increase the Quantitative Easing (QE) programme by 25 billion pounds to 400 billion pounds. However, it did not go through.

Bank of Japan also kept the rates unchanged up to 0.1% which was expected by the streets. This is because the apex governor Masaaki Shirakawa announced his last policy meeting under the existing government. A new governor is soon going to be appointed and hence Masaaki maintained more or less a status quo leaving the rates unchanged and also did not announce any kind of new measures.

However, one announcement which was positive from the monetary meet was that the Japanese economy is at its bottom in terms growth and would not weaken going ahead. This cheered the capital market of the country, with Nikkei closing the day higher by almost 2.57% to the levels of 12800.

We believe that the monetary policy worldwide is more biased towards growth which could be seen from ECB, Bank of England and Bank of Japan. Even the job data from the US market fueled positive sentiments helping the US indices to touch their new five-year high. With this, all eyes are now on the Reserve Bank of India (RBI) and its monetary meet which is scheduled on March 19, 2013. The government has done its bit, taking reformist actions and also looks like it would manage the fiscal deficit. And it is now time for the RBI to go ahead and spur growth and generate positive sentiments across the economy.

Market participants are expecting at least a 25 basis points cut in the repo rate in its meet. However, the Governor D Subbarao has the habit of surprising the street and may remain status quo or may cut 50 basis points at the most. Looking at the current environment, where inflation is showing some signs of moderation, coupled with the twin deficit which probably seems manageable, the probability of the latter looks more possible. Nevertheless, we would be updating our readers on the same as and when things the time arises.