The Reserve Bank of India’s Monetary Policy Committee presented its last bi-monthly policy review for the current fiscal on Wednesday and kept repo rate unchanged at 6 per cent. The reverse repo rate under the LAF (liquidity adjustment facility) remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.25 per cent.
The policy, determined on the basis of global uncertainty and inflation, is coming at a time when there’s a huge volatility triggered by rising inflation and uncertainty over the US Federal Bank rate. Besides domestic inflation touching a 17-month high of 5.21 per cent against the RBI’s 4 per cent target, rising crude oil prices and the government’s announcement on MSP (minimum support price) might have also put some pressure on the RBI to keep the repo rate unchanged.
Earlier, there were speculations that the RBI would change its monetary policy stance from ‘neutral’ to ‘cautious’. The reasons were plenty and visible. The Wall Street has just suffered its worst intra-day crash in a decade over a possible Fed rate hike to control inflation. Federal Reserve has seen a leadership change. Oil prices have shot up. Overall global markets are under pressure over uncertainly.
A year ago, the RBI had shifted its policy stance from ‘accommodative’ to ‘neutral’. A ‘neutral’ stance actually meant that RBI would move either way as against easing under the ‘accommodative’ stance. In its sixth bi-monthly monetary policy statement, there are all indications now for a change in the stance as the rates could be higher going forward.
3:16 pm: RBI attributes volatility in financial markets to uncertainty over the pace of normalisation of the US Fed monetary policy.
3:15 pm: Exact magnitude of MSP rise on inflation cannot be fully assessed at this stage: RBI
3:10 pm: RBI sees pick in credit growth due to bank recapitalisation and resolution proceedings under IBC
3.05 pm: Monetary policy in itself has become flexible in terms off inflation risks, says the RBI governor.
3.04 pm: Global demand is improving, which should strengthen the domestic economy, says Urjit Patel.
3:00 pm: The focus of the Union Budget on the rural and infrastructure sectors is also a welcome development as it would support rural incomes and investment, and in turn provide a further push to aggregate demand and economic activity: RBI Governor Urjit Patel
2:58 pm: Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices. Considering these factors, inflation is now estimated at 5.1 per cent in Q4, including the HRA impact: Urjit Patel
2.55 pm: MPC noted that Recap of PSBs should improve credit growth further, says Urjit Patel.
2.54 pm: GVA growth for 2018-19 is projected at 7.2 per cent overall – in the range of 7.3-7.4 per cent in H1 and 7.1-7.2 per cent in H2.
2.53 pm: The RBI statement says inflation remained contained in most AEs, barring the UK, on subdued wage pressures. Inflation was divergent in key EMEs due to country-specific factors.
2.52 pm: The MPC says economic activity accelerated in emerging market economies (EMEs) in the final quarter of 2017.
2.45 pm: The RBI says the decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
2.40 pm: The reverse repo rate under the LAF (liquidity adjustment facility) remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.25 per cent.
2:38 pm: Liquidity in the system continues to be in surplus mode, says RBI
2.36 pm: MPC votes 5-1 in favour of status quo on repo rate.
2.33 pm: MPC maintains neutral stance on policy.