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25 bps hike expected in tomorrow's credit policy: JP Morgan
Published on Mon, Jul 24, 2006 at 11:25 , Updated at Tue, Jul 25, 2006 at 11:10
Source : Moneycontrol.com
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Siddharth Mathur of JP Morgan expects a 25 bps hike in tomorrow's credit policy. He anticipates more rate hikes after this round. According to Mathur, bond markets have factored in the rate hike. He also says that the market currently has a bearish view on liquidity. Mathur sees the year-end target for the rupee at 47.50 as against a dollar. He further states that it is unlikely that CRR cut will be discussed in the policy. Excerpts from CNBC - TV18’s exclusive interview with Siddharth Mathur: Q: Are you expecting a rate hike tomorrow?
Q: Don't you think that consensus is a dangerous thing with the RBI Governor because this Governor seems to revel in the surprising consensus? A: That is absolutely right. The last five rate hikes that Governor Reddy has delivered havs surprised markets. There have been instances when the market was expecting a hike and he did not hike. But I think this time around, Governor Reddy will deliver as per the consensus. The reason I say that is opportunistically for the first time in a very long while, the Ministry of Finance, RBI and the common man seems to be singing the same tune regarding inflation. There is a great deal of concern about prices rising. We have seen the whole host of fiscal side measures being taken over the last month or so. Now it is time for Governor Reddy to play ball. I would be very surprised to see disappointment in the market this time round. Q: How do you expect the bond markets to react to that, or do you think it is largely in the price? A: I think it is largely in the price. In fact, what the bond market will probably look for in the statement will be some cue on the liquidity environment, going forward. I think the market holds a slightly bearish opinion on liquidity prospects. If RBI were to clarify that there were no comments on possibility of CRR hike in the coming weeks and months, then I think the bond market should actually take that as a positive sign. Rate hike and bad liquidity are already in the price, so anything that changes those expectations is all that will move markets. Contd on Pg 2... |
A: Yes, we do. I think now, if one looks at the markets, 25 bps rate hike is in the price. I think the market also expects Governor Reddy to continue sounding caution on inflation. There is every likelihood that tomorrow’s rate hike is likely to be followed by more in the future.Archive 1 | 2 | | Next page » | |
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