RBI may cut repo rate by 25 bps, keep CRR intact

Will the RBI go in for a rate cut, or will it not?

This is the question that bothers many who are eagerly awaiting the apex bank's mid-quarter policy review slated for Monday as far as key rates are concerned.

Though a 100 basis point cut in the Cash Reserve Ratio has been speculated till three days back, the RBI is now facing fresh realities which could be the game-changers for the economy, in general, and the monetary policy, in particular.

The fresh triggers for concern on the inflation front for the apex bank are the increase in food and fuel prices and the more-than-expected hike in the Wholesale Price Index to 7.55 per cent in May from 7.23 pre cent in April.

The hike in minimum support price for paddy, oilseeds and pulses in the range of 15-50 per cent is set to increase inflationary pressures on the economy even if one wants to put up a brave front as regards the weakening rupee and contracting exports, industry experts say.

The statement of the RBI Governor, Dr D. Subbarao, on Thursday that growth had to be sacrificed to tame inflation in a way reflects a sentiment in the central bank that might be different from the market expectations of a big cut in the CRR to the extent of 100 basis points.

CRR cut?

The CRR cut now seems unlikely as the need for fresh liquidity is debatable at a time when corporate credit off-take is still low.

Further, a CRR cut without a corresponding repo rate cut is unlikely to result in immediate interest rate cuts by banks as has been demanded by the industry.

So, Dr Subbarao may prefer a cautious approach by keeping the cash reserve ratio untouched at the existing 4.75 per cent. At the same time, the industry concerns could be addressed by lowering the repo rate by 25 basis points.

This will give RBI a chance to wait-and-watch till next quarterly policy.

via ~ thehindubusinessline

Romney: Obama’s ‘doing fine’ comment wasn’t just misspeak

Mitt Romney doubled down on his efforts to cast President Obama as "out of touch," insisting Obama's declaration last week that the private sector is "doing fine" wasn't just a random gaffe.

Speaking at a rally in Orlando, Fla., Romney insisted Obama's remark "wasn't just one line taken out of context" and said it was just one of many signs that the current president "is so out of touch with what's happening across America."

"It is finally time to have a president who's in touch with what's happening in America, and I am," Romney declared, vowing that, if elected, he would restore the country's "strength."

Appearing in a battleground state that many consider a must-win for his campaign this fall, Romney took specific aim at Obama's health care law, arguing that it has been detrimental to the nation's economy because of the negative impact on small businesses that can't afford to pay for expanding health care coverage.

The Republican nominee also pointed to expanding cost estimates of what it will cost the federal government to pay for implementing the law.

"It's not just bad policy," Romney said, speaking against the backdrop of a sign that read "Repeal & Replace Obamacare." "It's simply unaffordable."

As he does at almost every single campaign event, Romney pledged to begin efforts to repeal Obama's health care law on "day one" of his presidency. In Florida, he acknowledged the issue of whether the law's mandate requiring individuals to obtain health care coverage or receive it from their employers is currently pending before the Supreme Court.

But "whatever happens," Romney told supporters in Florida, it will still be up to the next president to make a decision about what to do about the rest of Obama's health care law.

"I will repeal it," he vowed.

Via ~ news.yahoo

Pranab rejects S&P report, says India will see turnaround

Finance minister Pranab Mukherjee on Monday rubbished ratings agency Standard and Poor’s claims that India may be the first BRIC economy to lose investment-grade rating.

Reacting to the report, Mukherjee said that the government was fully seized of the current situation and he was confident that there would be a turnaround in the country’s growth prospects in the coming months.
He said that the warning from S&P was not based on a fresh rating action.

“Between April 2012 and now, there are no significant events to indicate that the economy’s vulnerability to shocks has increased, though growth numbers for the fourth quarter 2011-12 have come below the expectations,” Mukherjee said.

S&P had on Monday issued the warning that slowing GDP growth and political roadblocks to economic policymaking could be some of the factors that could lead to such an action.

“Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality," said Standard & Poor's credit analyst Joydeep Mukerji in a report titled “Will India be the first fallen BRIC angel’, that examines the forecasts for economic growth, and the possible effects on business confidence and the government's commitment to economic reform.

The 'BBB-' long-term sovereign credit rating on India is currently one notch above speculative grade. A ratings cut would push up yields on the benchmark 10-year bond. Public sector units, including state-run banks, would be hit particularly badly, since their finances are closely tied to government finances. It could also drive down foreign investment into India, as global investors look to more stable destinations for returns.