The Reserve Bank of India pulled a A) statistics B) surprise on the markets on Friday by keeping its benchmark interest rate unchanged at 6.5%. The decision to stand pat comes even as the central bank A) changed B) categorized its policy stance from “neutral” to “calibrated tightening”, indicating that rates could either go up or stay steady in the coming months. The A) consensus B) determination on the street was that the RBI would raise rates by at least 25 basis points to support the rupee, with some even predicting a hike of 50 basis points. Not surprisingly, the rupee A) rectified B) weakened past the 74-mark to the U.S. dollar for the first time ever after the news of the RBI holding rates steady hit the markets. Stocks, which have been on a downtrend since September, also took a hit on Friday while bond yields A) departed B) fell.
Explanation:
Correct Answer is (d).Smart Approach:
Most of you must be wondering that it would be very time consuming to attempt these questions. But being smart is what it takes to attempt such questions correctly in order to get some brownie points over your competitors.
For this sentence, blank I will be filled by B only since it talks about an unexpected move by the RBI in its bi-monetary policy decisions. So, our answer will start with B only.
Coming to the options, there are four options that start with B and it will eliminate E anyway.
Now coming to Blank II, we are talking about some alterations made by RBI in the policy. So, A should be the correct word here. And with this, we can eliminate A also.
Coming to blank III, A will be the correct choice since the market was expecting something from RBI. It will now eliminate option C.
Left with options B and D, we can see that they are differentiated by the word that will fill the Blank IV. Blank IV can be filled with B only and it will give us the assurance that B can be eliminated also.
So, we are now left with our correct choice option D.
Detailed Explanation:
For Blank I, it is clear that we are talking about something unexpected announced by the RBI in its monetary policy review done recently. So, B would be the correct word to be used here since it was a surprise given by the RBI to the market as well as all the other stakeholders.
For blank II, we are talking about the alteration in the stance of the RBI and simply put, it is a change on the part of the RBI towards the monetary policy of the central bank. A should be the correct word to be used here.
For blank III, A is the correct choice since it is clear that there was an expectation of the market and there was also concurrence regarding such expectation of the market. B can be ruled out from consideration.
Blank IV should be filled with B since it is very much evident that the Indian currency has fallen in the recent months and now it has breached the 74 mark also in the foreign exchange market of the country.
Blank V should be filled with B since we are talking about falling bond yields in the country along with the depreciation of the currency of the country.
This makes the correct combination as BAABB
Hence, option D is the correct choice among the given options.
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By: Abhishek kumar