RBI Governor Duvvuri Subbarao on Tuesday defended the bank's decision to keep the key policy rate unchanged saying inflation could rise to above 8 per cent in the near-term.
The RBI, which started exiting its easy money policy stance since October last, is widely expected to hike key short-term lending (repo) and borrowing rates (reverse repo) by 0.25 per cent at its quarterly policy review on July 27.
This is the fifth straight cut in rates by the Reserve Bank of India in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
Analysts and economists say that it is too early to expect anything dramatic on the interest rate regime despite the recent reform measures.
In the light of credit offtake not picking up despite ample liquidity in the system, the RBI is likely to keep policy rates unchanged in its annual monetary policy, to be unveiled on Tuesday, but may impress upon banks to step up lending to sectors slowing down.
The US Fed rate cut of 50 basis points is unlikely to have any significant impact on foreign inflows into India, Economic Affairs Secretary Ajay Seth said on Thursday. He said the US Federal Reserve has done what it assesses is good for the largest economy in the world, but the RBI will take a decision on interest rate cut keeping the Indian economy in mind. "It is a positive for the global economy, including the Indian economy. "It is a 50 basis points cut from a high level.
WPI-based inflation falls to 5-month low of 6.16%.
The Reserve Bank of India on Friday decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy faces heat of the second Covid wave.
The Reserve Bank on Friday retained the GDP forecast for the current financial year at 9.5 per cent and flagged global semiconductor shortages, elevated commodity prices and potential global financial market volatility as downside risks to economic growth. In his address after the three-day meeting of the rate-setting panel, RBI Governor Shaktikanta Das said recovery in aggregate demand gathered pace in August-September, and it is reflected in high-frequency indicators, like railway freight traffic; port cargo; cement production; electricity demand; e-way bills; GST and toll collections. "The ebbing of infections, together with improving consumer confidence, has been supporting private consumption," he said, and added the pent-up demand and the festival season should give further fillip to urban demand in the second half of the financial year.
The wholesale inflation rose for the third consecutive month in May at 2.61 per cent on account of rise in prices of food articles, especially vegetables, and manufactured items. The wholesale price index (WPI) based inflation was 1.26 per cent in the previous month. It was (-) 3.61 per cent in May 2023. "Positive rate of inflation in May, 2024 is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing etc," the ministry of commerce & industry said in a statement on Friday.
Reserve Bank Governor Shaktikanta Das on Wednesday said the country is at the doorstep of economic revival on the back of accommodative monetary and fiscal policies being pursued by the central bank and the government.
Reserve Bank will have to constantly re-assess the "dynamic and fast changing situation" and tailor its actions accordingly, Governor Shaktikanta Das said during the recent meeting of the Monetary Policy Committee (MPC) which decided to maintain status quo on key interest rate. According to the minutes of the six-member MPC meet released by Reserve Bank of India (RBI) on Friday, the five other members had also expressed a similar opinion amid the ongoing Russia-Ukraine conflict's impact on the global and domestic economies. MPC, which held its meeting from April 6-8, unanimously decided to keep the borrowing costs unchanged at a record low for the 11th time in a row in a bid to continue supporting economic growth despite inflation edging higher in the aftermath of Russia-Ukraine conflict.
Focus on inflation, higher CPI projection dampen bond market mood.
These are the highlights of RBI Governor Shaktikanta Das's statement and resolution of the Monetary Policy Committee (MPC):
Fresh dollar demand from importers and some banks on the back of smart rise in the US dollar ahead of RBI monetary policy meeting on Tuesday also weighed on the rupee, said forex dealers.
Snapping its six-day losing streak both benchmarks rallied over 1% after RBI kept key policy rates unchanged.
A likely easing in inflationary pressures in the forthcoming months will reopen the window for the RBI to once again prioritise growth and ease its interest rates.
The apex bank hiked its repo, reverse repo (overnight lending and borrowing rates) to 5.25 per cent and 3.75 per cent, respectively, while the cash reserve ratio, or the portion of deposits banks park with RBI, to 6 per cent in line with analysts' expectations.
Similarly, 51 per cent of 105 market participants polled by RBS said they do not expect a CRR cut in the quarterly policy announcement next Tuesday.
RBI unsure whether to cut rates or not in its next monetary policy.
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
The rupee on Monday plunged by a hefty 52 paise to slip below 54-mark for the first time in five weeks on month-end dollar demand from importers and corporates, amid the much-awaited RBI monetary policy review on Tuesday.
Dr Nagesh Kumar, one of the three new MPC members, wanted the MPC to reduce the repo rate by 25 basis points to 6.25%.
The Reserve Bank indicated that it would continue with its accommodative policy stance as managing growth and inflation poses a big challenge for the central bank.
The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline, indicating the effectiveness of previous policy rate actions, anticipate experts. Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
Mukherjee said it was not necessary for the RBI governor to consult him before the mid-quarterly review of the credit policy.
Bank lending has seen a significant fall. RBI needs to bring liquidity into the system immediately.
The recently released RBI First Quarter Review of Monetary Policy 2009-10 and the accompanying 'Macroeconomic and Monetary Developments First quarter review 2009-10 have indicated that on the basis of Balance of Payments (BoP) the export growth for 08-09 has declined by over 22% to 5.4% and also the import growth has declined by over 21% during the same period.
The repo rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's MPC.
ICICI Bank was the top gainer in the Sensex pack, rising around 4 per cent, followed by UltraTech Cement, Sun Pharma, Bharti Airtel, HUL, SBI, L&T, Axis Bank and IndusInd Bank. On the other hand, Reliance Industries, Bajaj Finserv, HCL Tech and HDFC were among the laggards.
'For the RBI, for a central bank, reputational risk is the worst risk.' 'Credibility is the worst risk,'
'Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income,' points out Tamal Bandyopadhyay.
The SBI report ruled out a October rate hike
Terming the timing of monetary tightening by the Reserve Bank as 'a bit of a surprise', country's largest bank SBI today said the apex bank may further hike its key rates in the annual monetary policy on April 20, if inflation remains high in March as well.
Rajan will evolve a policy with the help of professional persons for a national consensus if we have to carry on with implementing social and economic changes in a complex economy.
The country's largest home loan player, Housing Development Finance Corporation, said on Thursday it will not hike interest rates even if the central bank signals an upward movement in the monetary policy on July 27.
FM says government policies aim to contain inflation, spur growth.
The report further noted that inflation is expected to fall to 4.5 per cent by quarter ended March 2017.
RBI has cut policy rate thrice during 2015.
In his first monetary policy review since taking office on September 4, RBI Governor Raghuram Rajan increased the repo rate by 25 basis points to 7.50 per cent.
