RBI’s announcement – a disappointment [31 July 2012]

“Today’s announcement from the RBI was something of a disappointment despite the lowering in the statutory liquidity ratio. We had not expected to see a further reduction in interest rates at this stage, but the tone of the comments by the RBI were decidedly cautious – with the inflation forecast revised in an upward direction and concerns raised about the medium term prospects for any improvement in the inflation trend. In particular, the RBI noted the risks stemming from structural imbalances in the economy and the adverse weather. Against this backdrop, it seems improbable that any further easing in monetary policy is likely over the coming months.
 
The prospect of a softer economy coupled with little additional stimulus from the central bank suggests that the flatter trend in the commercial real estate sector, which was highlighted in the Q2 RICS Commercial Property Survey, will persist through the second half of the year with weaker occupier demand feeding through into rent levels. Meanwhile, for the residential sector prices in key centres are likely to remain generally firm; but this resilience is coming at the cost of transaction volumes. This weaker sales picture is unlikely to change until the economy gains renewed traction”
–          Simon Rubinsohn, Chief Economist, RICS
 

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