Yes, Rajan this time too made everyone surprise when
he did not move interest-rate as per the popular expectation... a rate cut...
But, he was right that he had no reason to cut-down except oil-prices...
Inflation data is awaited... Governor’s job as it seems does not enjoy complete
independence in stoking employment and growth and the public-side is always
under pressure to perform in the face of formidable opponents... Who just say
the opposite... always try to get limelight by making burning comments... to
get space in the voters memory... Issues are very important in
political-economy... and most importantly the majority issue since resources
are scarce.... Here the government who does
all the public-spending need more followers... Politics runs on populism...
But, the work of a RBI governer whois responsible for money-supply, inflation,
and employment directly through its monetary-policy is again a tough job... It
needs reconciliation... Anybody has noticed or not the RBI has always, in most
occasions has tried to improve liquidity in the market under expectations...
Even Subbaro under pressure from government tried to cut down the cycle by
easing rates earlier than required... Food prices started coming down but the
rate cut pushed them again to 10% and then again he started tightening which
the governor continued when he joined the bank... Even today the RBI has
reduced SLR to release more funds for the industry... Banks can now lend more
at current rates... kind of expansion... Many at economic-times noticed... Few
injections through open market operations... whenever injection of money to
commercial banks increases in any form... it affect interest rates... bonds
offer a good guidance... Even today bonds yields decreased... money-supply make
the commercial banks and bond traders adjust their margins... Since
money-supply has been increased through a reduction in SLR bond yields have gone
down... Recently, both the RBI and the GoI tried to give infrastructure a push
through many relaxations... Even the RBI has announced reduced CRR requirements
for banks lending to the infrastructure sector...
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