Is YV A Party Pooper?

Hmm, I am posting this a good 13 days after the last post. So, there is a lot to talk about. In the meantime, "Big Bull Bernanke" has cut interest rates ( confirming that the United States is indeed in a recession cycle), Y.V. Reddy has maintained them steady; Societe Generale has been given a lesson by " Leeson II"; and the UK treasury is considering a law that will obligate Bank Of England to provide secret liquidity to Banks in the red so that any possibility of a bank run is foreclosed.

This post am goin to talk about the recently unveiled review of monetary policy of the Reserve Bank. The policy came " against the run of play" so to speak, everone including the Finance Ministry wanted the Bank to cut rates and many punted that YV would go the "Big Ben" way. But as with most central Bankers, the Governor is a cautious man. There was no rate Cut; instead the Bank adopted a policy of moral suasion to convince Banks to lend more.( at present excess liquidity that Banks have is invested in low yield low Risk government securities).

The message is clear enough.Inflation is low because of the artificial suppressing of oil prices. Inflationary tendencies and curbing them is topmost priority. With the OPEC indicating thst it would oppose any demand for more oil in the markets, oil prices will continue to spiral and money would be required to service that.

In the process, the central Bank also underlined its autonomy from pressures of the Finance Ministry ( populist measures like Rate cuts will win you votes and Brownies, but "its the Economy stupid!"that is more important) and its emphasis to fashion itself based on Indian conditions. Yours truly also thought that the Bank would take a leaf out of fed's book but was (thankfully) proved wrong.

That does mean lull in Realty and Banking stocks. ( these are rate sensitive industries) hitherto the former has been providing momentum. But this is small price to pay for a more stable financial system in the long term.

So, is YV the party pooper? Only a fool would say that.