Shift in policy stand

Today’s policy is a clear shift in the monetary policy stand, highlighting the intensifying downside risks to growth. While the policy rate rise was as we had expected, it looks like the rate rise cycle is close to peaking. There would continue to be some inflationary pressures from administered prices, but the focus would now be on growth and therefore, we may not see further rate rises.

The focus would now be on how growth pans out. The candid policy statement and the much-clearer visibility on the monetary policy outlook are very welcome trends, and should help anchor expectations and reduce uncertainty.

The deregulation of savings bank rates is another step towards liberalising interest rates. It may not result in an immediate sharp rate increase, but in the long run, it could add relative value to banks that are more efficient.

Shailendra Bhandari
MD & CEO, ING Vysya Bank