Monday 23 September , 2013
After the dramatic postponement of the tapering by US Fed Reserve on Thursday 19th and the increase in the rate by 25 basis points by RBI - the sensex went thru a 1000 point dance.
RBI was quite right the postponement of the tapering is just that - postponement. Can US indefinitely go thru the $ 85 billion QE each month ? The federal reserve already has over $ 3.5 trillion balance sheet and even the tapering by 50% to around $ 45 billion will mean that the US feds are are going to end up with the balance sheet of over $ 4.1 trillion by end of next year , Dec 2014.
Is this really sustainable ? Is it even going to help much longer ?
I think sooner or later the tapering has to happen. The earlier it happens - the better for the everybody around.
RBI was very right is in increasing the rates - inflation and CAD are a major issue that needs to be tackled on a immediate basis . Now is the best time to take all the tough and painful measures . As any amount of rate reduction is not going to translate into growth or additional investment - till the elections to the Parliament is over some time middle of next year. And consumer INFLATION can not be allowed to rise any further.
All credit to RBI for its determination to address the CAD and Inflation issues.
As for the markets ? - any tough measure to ensure reduction in CAD and Inflation should be seen as a positive sign. And buying on declines or panic selling would be best way to invest in the current equity market.
After the dramatic postponement of the tapering by US Fed Reserve on Thursday 19th and the increase in the rate by 25 basis points by RBI - the sensex went thru a 1000 point dance.
RBI was quite right the postponement of the tapering is just that - postponement. Can US indefinitely go thru the $ 85 billion QE each month ? The federal reserve already has over $ 3.5 trillion balance sheet and even the tapering by 50% to around $ 45 billion will mean that the US feds are are going to end up with the balance sheet of over $ 4.1 trillion by end of next year , Dec 2014.
Is this really sustainable ? Is it even going to help much longer ?
I think sooner or later the tapering has to happen. The earlier it happens - the better for the everybody around.
RBI was very right is in increasing the rates - inflation and CAD are a major issue that needs to be tackled on a immediate basis . Now is the best time to take all the tough and painful measures . As any amount of rate reduction is not going to translate into growth or additional investment - till the elections to the Parliament is over some time middle of next year. And consumer INFLATION can not be allowed to rise any further.
All credit to RBI for its determination to address the CAD and Inflation issues.
As for the markets ? - any tough measure to ensure reduction in CAD and Inflation should be seen as a positive sign. And buying on declines or panic selling would be best way to invest in the current equity market.
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