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05
December 2018
 |
Repo Rate (The Total Investment & Insurance
Solutions)
The
Reserve Bank of India (RBI) on Wednesday maintained status quo on repo rate
(short-term lending) at 6.5% in its fifth monetary policy review for
2018-19.Following the move, the reverse repo rate (short-term borrowing) stands
at 6.25%. Subsequently, the marginal standing facility (MSF) and the Bank Rate
have also remain unchanged at 6.75%.
The Total Investment & Insurance Solutions
In a
statement, the Reserve Bank said, "The decision of the monetary policy
committee (MPC) is consistent with the stance of calibrated tightening of
monetary policy in consonance with the objective of achieving the medium-term
target for consumer price index (CPI) inflation of 4% within a band of +/- 2
per cent, while supporting growth."
Even as
inflation projections have been revised downwards significantly and some of the
risks pointed out in the last resolution have been mitigated, especially of
crude oil prices, the MPC felts that several uncertainties still cloud the
inflation outlook.
"First, inflation projections incorporate benign food prices based on the realised outcomes of food inflation in recent months. The prices of several food items are at unusually low levels and there is a risk of sudden reversal, especially of volatile perishable items. Secondly, available data suggest that the effect of revision in minimum support prices (MSPs) announced in July on prices has been subdued so far. However, uncertainty continues about the exact impact of MSP on inflation, going forward."
"Thirdly, the medium-term outlook for crude oil prices is still uncertain due to global demand conditions, geo-political tensions and decision of OPEC which could impinge on supplies. Fourthly, global financial markets continue to be volatile. Fifthly, though households' near-term inflation expectations have moderated in the latest round of the Reserve Bank's survey, one-year ahead expectations remain elevated and unchanged. Sixthly, fiscal slippages, if any, at the centre or state levels, will influence the inflation outlook, heighten market volatility and crowd out private investment. Finally, the staggered impact of housing rent allowance (HRA) revision by state governments may push up headline inflation. While the MPC will look through the statistical impact of HRA revisions, it will be watchful of any second-round effects on inflation," it added.
"First, inflation projections incorporate benign food prices based on the realised outcomes of food inflation in recent months. The prices of several food items are at unusually low levels and there is a risk of sudden reversal, especially of volatile perishable items. Secondly, available data suggest that the effect of revision in minimum support prices (MSPs) announced in July on prices has been subdued so far. However, uncertainty continues about the exact impact of MSP on inflation, going forward."
"Thirdly, the medium-term outlook for crude oil prices is still uncertain due to global demand conditions, geo-political tensions and decision of OPEC which could impinge on supplies. Fourthly, global financial markets continue to be volatile. Fifthly, though households' near-term inflation expectations have moderated in the latest round of the Reserve Bank's survey, one-year ahead expectations remain elevated and unchanged. Sixthly, fiscal slippages, if any, at the centre or state levels, will influence the inflation outlook, heighten market volatility and crowd out private investment. Finally, the staggered impact of housing rent allowance (HRA) revision by state governments may push up headline inflation. While the MPC will look through the statistical impact of HRA revisions, it will be watchful of any second-round effects on inflation," it added.
While
the decision on keeping the policy rate unchanged was unanimous, Dr Ravindra H
Dholakia voted to change the stance to neutral. The Total Investment & Insurance Solutions
The
next meeting of the MPC is scheduled between 5th to 7 February 2019.
Here
are the latest policy rates following MPC review…
Repo Rate: 6.50%
Reverse Repo Rate: 6.25%
Bank Rate: 6.75%
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