Indian Central Bank's Advisory Panel Favored A Softer July Policy

MUMBAI :- Most members of the Reserve Bank of India's advisory committee favored a softer stance than the central bank took with its July monetary policy, minutes of the committee's meeting released Thursday reveal. On July 26 the RBI surprised markets by hiking its key lending rate by a sharper-than-expected 50 basis points. Four members of the technical advisory committee, or TAC, suggested the RBI " wait and watch" as the transmission of earlier rate hikes was still playing out and uncertain global conditions were slowing domestic investments. "While one member suggested an increase in the repo rate by 25 basis points, two members felt that the increase in the policy rate be avoided, if possible," the minutes released on the RBI website stated. Another member suggested an increase in the cash reserve ratio by 25 basis points. The committee said while investment activity was slowing down, overall growth was strong compared to other emerging markets. Inflation, however, is stubbornly high and a major concern. Most members felt there could be a slippage in the fiscal deficit estimated in the federal budget. They expressed concern that the entire burden for inflation management was on monetary policy, it stated. The central bank's TAC, chaired by the RBI Governor, includes some central board members, deputy governors and external experts in the areas of monetary economics, central banking, financial markets and public finance. The TAC periodically advises the RBI on the stance of monetary policy in the light of macroeconomic and monetary development. The last meeting, as a run up to the first-quarter policy review, was held on July 20 and was chaired by Governor Duvvuri Subbarao. 

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201108180957dowjonesdjonline000343&title=indian-central-banks-advisory-panel-favored-a-softer-july-policy