Equity benchmark indices reversed early morning trends and turned red on Friday afternoon after the Reserve Bank of India cut repo rate by 25 basis points to 5.15 per cent but also lowered its GDP growth forecast for the current financial year to 6.1 per cent from 6.9 per cent earlier.

At 1:30 pm, the BSE S&amp;P Sensex was down by 163 points at 37,944 while the Nifty 50 edged lower by 40 points to 11,274.

While the central bank brought the cumulative reduction in interest rate of 135 basis points for this calendar year, investors appeared unsure if it is sufficient to support the flagging consumer demand amid slowing economic output, rising unemployment rate and low business confidence.

Besides, the aggravating non-banking financial company (NBFC) liquidity crisis continues to severely impact the credit availability for industry, especially real estate developers and construction firms.

At the National Stock Exchange, most sectoral indices were in the red except for Nifty auto, IT and pharma.

Nifty bank dropped by 2 per cent, media by 1.9 per cent, FMCG by 1.4 per cent and realty by 0.8 per cent.

Among stocks, the prominent losers were Kotak Mahindra Bank and Grasim which slipped by 3 per cent each, Bharat Petroleum Corporation by 2.6 per cent, JSW Steel by 2.2 per cent and UltraTech Cements by 2 per cent.

However, those which showed gains were Cipla, Mahindra &amp; Mahindra and IT majors like Infosys, Tech Mahindra and Tata Consultancy Services. 
&nbsp;

Equity benchmark indices reversed early morning trends and turned red on Friday afternoon after the Reserve Bank of India cut repo rate by 25 basis points to 5.15 per cent but also lowered its GDP growth forecast for the current financial year to 6.

Equity benchmark indices reversed early morning trends and turned red on Friday afternoon after the Reserve Bank of India cut repo rate by 25 basis points to 5.15 per cent but also lowered its GDP growth forecast for the current financial year to 6.1 per cent from 6.9 per cent earlier. At 1:30 pm, the BSE S&P Sensex was down by 163 points at 37,944 while the Nifty 50 edged lower by 40 points to 11,274. While the central bank brought the cumulative reduction in interest rate of 135 basis points for this calendar year, investors appeared unsure if it is sufficient to support the flagging consumer demand amid slowing economic output, rising unemployment rate and low business confidence. Besides, the aggravating non-banking financial company (NBFC) liquidity crisis continues to severely impact the credit availability for industry, especially real estate developers and construction firms. At the National Stock Exchange, most sectoral indices were in the red except for Nifty auto, IT and pharma. Nifty bank dropped by 2 per cent, media by 1.9 per cent, FMCG by 1.4 per cent and realty by 0.8 per cent. Among stocks, the prominent losers were Kotak Mahindra Bank and Grasim which slipped by 3 per cent each, Bharat Petroleum Corporation by 2.6 per cent, JSW Steel by 2.2 per cent and UltraTech Cements by 2 per cent. However, those which showed gains were Cipla, Mahindra & Mahindra and IT majors like Infosys, Tech Mahindra and Tata Consultancy Services.

Sensex turns red after RBI lowers GDP forecast to 6.1%

The monetary policy committee (MPC) of the <a href="https://www.wionews.com/india-news/reserve-bank-of-india-to-transfer-surplus-of-rs-176-lakh-crore-to-government-key-points-246060">Reserve Bank of India</a> (RBI) on Friday has cut its benchmark repo rate by 25 basis points to 5.15 per cent, in the fifth straight interest rate cut.

The central bank maintained its accommodative policy stance.&nbsp;The&nbsp;GDP growth for 2019-20 has been revised downwards from 6.9 per cent in the August policy to 6.1 per cent.

RBI has said that there is space to cut repo rates further.

Watch: RBI credit policy - central bank cuts rate by 25 bps to 5.15%

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The reverse repo rate has been reduced to 4.9 per cent, and the bank rate stands at 5.40 per cent.&nbsp;

The six-member <a href="https://www.wionews.com/india-news/social-media-rumours-of-banks-shutting-down-false-reserve-bank-of-india-252026">monetary policy committee</a> (MPC) headed by Governor Shaktikanta Das announced the decision after a three-day meeting.&nbsp;

Earlier on February 7, April 4, June 6 and Aug 7, the central bank had reduced the key lending rate to infuse liquidity and push economic growth.

Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers and lowers equal monthly instalments on home loans, car loans and personal loans.

India's economy grew by only 6.8 per cent in 2018-19, according to government data. GDP growth slumped lower to 5 per cent in the April to June quarter as against an 8 per cent in the year-ago period due to weak household spending, muted corporate investments, and a crippling slowdown in manufacturing and construction activity. Industry leaders say a substantial cut in the repo rate and bank lending rates are needed to boost manufacturing and domestic demand for economic growth.

(With inputs from ANI)

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Friday has cut its benchmark repo rate by 25 basis points to 5.15 per cent, in the fifth straight interest rate cut.

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Friday has cut its benchmark repo rate by 25 basis points to 5.15 per cent, in the fifth straight interest rate cut. The central bank maintained its accommodative policy stance. The GDP growth for 2019-20 has been revised downwards from 6.9 per cent in the August policy to 6.1 per cent. RBI has said that there is space to cut repo rates further. Watch: RBI credit policy - central bank cuts rate by 25 bps to 5.15% × The reverse repo rate has been reduced to 4.9 per cent, and the bank rate stands at 5.40 per cent. The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das announced the decision after a three-day meeting. Earlier on February 7, April 4, June 6 and Aug 7, the central bank had reduced the key lending rate to infuse liquidity and push economic growth. Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers and lowers equal monthly instalments on home loans, car loans and personal loans. India's economy grew by only 6.8 per cent in 2018-19, according to government data. GDP growth slumped lower to 5 per cent in the April to June quarter as against an 8 per cent in the year-ago period due to weak household spending, muted corporate investments, and a crippling slowdown in manufacturing and construction activity. Industry leaders say a substantial cut in the repo rate and bank lending rates are needed to boost manufacturing and domestic demand for economic growth. (With inputs from ANI)

Reserve Bank of India cuts repo rate by 25 bps,  from 5.40 per cent to 5.15 per cent

More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May.

While Syndicate Bank has made several changes to its offerings on loans and deposit products, Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products.

"Housing, vehicle and consumer loans will now be offered at the basis of a repo-linked rate. With the change, the housing loans will start from repo plus 2.9 per cent at 8.3 per cent," Syndicate Bank said in a statement. The saving bank deposits of over Rs 25 lakh will also be based on the repo rate, it added.

Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans. "We are working out the necessary modalities in this regard so as to launch such products during the current month," it said.

Union Bank said to provide better interest rate transmission, it will soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate.

Allahabad Bank's Managing Director S S Mallikarjuna said the bank will explore the option to develop products of both assets and liabilities linked with an external benchmark to transmit the benefits of rate cut to our customers shortly.

Indian Bank too said its home and vehicle loans will be linked to the repo rate from August 15.

The move to link the deposit and lending rates by these four lenders come even as the RBI has not mandated them to do so. On August 7, the RBI cut repo rate for the fourth consecutive time this calendar year by 35 basis points to 5.4 per cent.

Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May.

More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May. While Syndicate Bank has made several changes to its offerings on loans and deposit products, Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products. "Housing, vehicle and consumer loans will now be offered at the basis of a repo-linked rate. With the change, the housing loans will start from repo plus 2.9 per cent at 8.3 per cent," Syndicate Bank said in a statement. The saving bank deposits of over Rs 25 lakh will also be based on the repo rate, it added. Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans. "We are working out the necessary modalities in this regard so as to launch such products during the current month," it said. Union Bank said to provide better interest rate transmission, it will soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate. Allahabad Bank's Managing Director S S Mallikarjuna said the bank will explore the option to develop products of both assets and liabilities linked with an external benchmark to transmit the benefits of rate cut to our customers shortly. Indian Bank too said its home and vehicle loans will be linked to the repo rate from August 15. The move to link the deposit and lending rates by these four lenders come even as the RBI has not mandated them to do so. On August 7, the RBI cut repo rate for the fourth consecutive time this calendar year by 35 basis points to 5.4 per cent. Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

After State Bank of India, more PSU banks link deposit and loan rates to repo

Reserve Bank of India (RBI) has cut repo rate by 0.35% in its June policy. Watch this video to know more.

India: RBI cuts repo rate by 0.35%

The <a href="https://www.google.com/url?client=internal-uds-cse&amp;cx=006054055338965708568:09spwrlibei&amp;q=https://www.wionews.com/india-news/supreme-court-adjourns-vijay-mallyas-property-case-239158&amp;sa=U&amp;ved=2ahUKEwj5v8KB_9njAhVMvo8KHY7fCmQQFjAAegQIABAC&amp;usg=AOvVaw20rKRrKHpKk5VpcBNhjdBR">State Bank of India (SBI)</a> cut interest rates on deposits across all maturities on Monday but analysts said it would take time for the country's largest bank to make matching cuts in its lending rates.

State-owned SBI made the largest cuts on shorter-term deposits. Annual rates for 7-45 days are being reduced to 5.0% from 5.75% while for 46 days to 179 days, the rate is getting cut to 5.75% from 6.25%.

For deposits of 180 days up to 10 years, the rate is being cut by up to 20 bps for individual retail customers and by up to 35 bps for the bulk segment, defined as a single deposit of 20 million rupees ($290,626) and above.

The rate changes will be effective August 1.

The <a href="https://www.google.com/url?client=internal-uds-cse&amp;cx=006054055338965708568:09spwrlibei&amp;q=https://www.wionews.com/india-news/reserve-bank-of-india-to-cut-rates-again-in-august-as-doves-prevail-report-238360&amp;sa=U&amp;ved=2ahUKEwixlJPW_tnjAhUMgI8KHXQlBtgQFjABegQIDxAC&amp;usg=AOvVaw3zrXFTWUMT6pHc9S-9JsLA">Reserve Bank of India (RBI)</a> has cut its key repo rate by 75 basis points (bps) this year but commercial banks have mostly responded with just around 15-20 bps cuts in their key lending rates.

Banks often cite the high-interest rates they say they need to offer on deposits as a hindrance to being able to cut lending rates.

"We are in a global low-interest rate scenario. That is a clear fact. If the RBI reduces rates, SBI will reduce albeit with a lag and at a lesser rate," said Jagannadham Thunuguntla, head of research at Centrum Wealth Management.

The Indian government has already reduced interest rates on small savings schemes such as the National Savings Scheme, Public Provident Fund among others in late June by 10 bps.

Analysts said other banks may follow SBI's lead in cutting deposit rates but the timing and size of the moves will vary.

"In the current environment, people are looking at bank fixed deposits for the safety of capital due to extreme risk-aversion sentiment," Thunuguntla said.

"But once that sentiment revives, the low-interest rates on risk-free assets will act as a strong motivating factor for money to move into the more riskier assets."

The State Bank of India (SBI) cut interest rates on deposits across all maturities on Monday but analysts said it would take time for the country's largest bank to make matching cuts in its lending rates.

The State Bank of India (SBI) cut interest rates on deposits across all maturities on Monday but analysts said it would take time for the country's largest bank to make matching cuts in its lending rates. State-owned SBI made the largest cuts on shorter-term deposits. Annual rates for 7-45 days are being reduced to 5.0% from 5.75% while for 46 days to 179 days, the rate is getting cut to 5.75% from 6.25%. For deposits of 180 days up to 10 years, the rate is being cut by up to 20 bps for individual retail customers and by up to 35 bps for the bulk segment, defined as a single deposit of 20 million rupees ($290,626) and above. The rate changes will be effective August 1. The Reserve Bank of India (RBI) has cut its key repo rate by 75 basis points (bps) this year but commercial banks have mostly responded with just around 15-20 bps cuts in their key lending rates. Banks often cite the high-interest rates they say they need to offer on deposits as a hindrance to being able to cut lending rates. "We are in a global low-interest rate scenario. That is a clear fact. If the RBI reduces rates, SBI will reduce albeit with a lag and at a lesser rate," said Jagannadham Thunuguntla, head of research at Centrum Wealth Management. The Indian government has already reduced interest rates on small savings schemes such as the National Savings Scheme, Public Provident Fund among others in late June by 10 bps. Analysts said other banks may follow SBI's lead in cutting deposit rates but the timing and size of the moves will vary. "In the current environment, people are looking at bank fixed deposits for the safety of capital due to extreme risk-aversion sentiment," Thunuguntla said. "But once that sentiment revives, the low-interest rates on risk-free assets will act as a strong motivating factor for money to move into the more riskier assets."

State Bank of India cuts deposit rates, keeps lending rates unchanged

The Reserve Bank of India(RBI) today cut repo rate for the third consecutive time this year to 5.75 per cent from the current 6 per cent amid falling economic growth and uncertain global scenario.

The central bank changed its policy stance to accommodative&nbsp;from neutral.

The RBI cut interest rates by 0.25 per cent. India's central bank also cut GDP growth forecast for FY20 from 7.2 per cent to 7 per cent.

"The MPC (monetary policy committee) notes that growth impulses have weakened significantly, a sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," the policy resolution said.&nbsp;

The central bank&nbsp;raised inflation projection to 3-3.1 per cent for April-September.&nbsp;

The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das concluded its second meeting for the fiscal year 2019-20. On February 7 and April 4, the central bank had reduced the key lending rate by 25 basis points to infuse liquidity and push growth.

Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

India's economy grew just 6.8 per cent in 2018-19, according to government data. In the fourth quarter (January to March), the growth dipped to 5.8 per cent, marking a five-year low.

The Reserve Bank of India(RBI) today cut repo rate for the third consecutive time this year to 5.75 per cent from the current 6 per cent amid falling economic growth and uncertain global scenario.

The Reserve Bank of India(RBI) today cut repo rate for the third consecutive time this year to 5.75 per cent from the current 6 per cent amid falling economic growth and uncertain global scenario. The central bank changed its policy stance to accommodative from neutral. The RBI cut interest rates by 0.25 per cent. India's central bank also cut GDP growth forecast for FY20 from 7.2 per cent to 7 per cent. "The MPC (monetary policy committee) notes that growth impulses have weakened significantly, a sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," the policy resolution said. The central bank raised inflation projection to 3-3.1 per cent for April-September. The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das concluded its second meeting for the fiscal year 2019-20. On February 7 and April 4, the central bank had reduced the key lending rate by 25 basis points to infuse liquidity and push growth. Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans. India's economy grew just 6.8 per cent in 2018-19, according to government data. In the fourth quarter (January to March), the growth dipped to 5.8 per cent, marking a five-year low.

RBI cuts repo rates to boost growth; lowers GDP growth forecast to 7% in FY20

Reserve Bank of India reduced the repo rate by 25 basis points (bps) to 5.75 percent in the second bi-monthly monetary policy meet of the financial year 2019-20 (FY20). Watch this video to know more.

RBI cuts interest rates for third time in a row

WION Wallet: RBI reduces repo rate by 0.25% to 5.75%

The BSE benchmark <a href="https://www.wionews.com/business-economy/sensex-tanks-over-500-points-after-rbi-policy-outcome-financial-stocks-drag-224917">Sensex</a> plunged 554 points Thursday, dragged down by losses in banking, energy and capital goods stocks even as the RBI cut the policy rate to shore up growth.

Slashing benchmark lending rate for the third time this year, the central bank cut the repo rate by 0.25 per cent and changed its monetary policy stance from 'neutral' to 'accommodative'.

The RBI, however, lowered the economic growth forecast for the current fiscal to 7 per cent due to slow down in domestic activities and escalation in a global trade war. Following the announcement, the 30-share index cracked 553.82 points, or 1.38 per cent, to settle at 39,529.72. The bourse hit an intra-day low of 39,481.15 and a high of 40,159.26.

In similar movement, the NSE Nifty plunged 177.90 points, or 1.48 per cent, to end at 11,843.75. During the day, it hit a low of 11,830.25 and high of 12,039.80. Top losers in the Sensex pack included IndusInd Bank, Yes Bank, SBI, L&amp;T, Tata Steel, M&amp;M, Bajaj Finance, Vedanta, Tata Motors and RIL, tumbling up to 6.97 per cent.

Bucking the negative market trend, Coal India, PowerGrid, NTPC, HUL, Hero MotoCorp, Asian Paints and Infosys gained up to 1.92 per cent.

"The rate cut could not infuse positivity, and the decline steepened as focus shifted from policy rates to new emerging short-term tight liquidity situation due to issues like IL&amp;FS, DHFL and its impending impact on other financial institutions if any," said Narendra Solanki, Head-Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares &amp; Stock Brokers.

Lowered GDP forecast for the current year and failure to get any cue from RBI on the liquidity front except general assurance of addressing the situation added to the selling pressure later in the day, he added. The Indian rupee fell marginally to 69.28 against the US dollar.

Meanwhile, other Asian bourses ended on a mixed note, while Europe was trading in the green in opening deals. 
Brent crude futures, the global oil benchmark, fell 0.76 per cent to 61.09 per barrel.&nbsp;

The BSE benchmark Sensex plunged 554 points Thursday, dragged down by losses in banking, energy and capital goods stocks even as the RBI cut the policy rate to shore up growth.

The BSE benchmark Sensex plunged 554 points Thursday, dragged down by losses in banking, energy and capital goods stocks even as the RBI cut the policy rate to shore up growth. Slashing benchmark lending rate for the third time this year, the central bank cut the repo rate by 0.25 per cent and changed its monetary policy stance from 'neutral' to 'accommodative'. The RBI, however, lowered the economic growth forecast for the current fiscal to 7 per cent due to slow down in domestic activities and escalation in a global trade war. Following the announcement, the 30-share index cracked 553.82 points, or 1.38 per cent, to settle at 39,529.72. The bourse hit an intra-day low of 39,481.15 and a high of 40,159.26. In similar movement, the NSE Nifty plunged 177.90 points, or 1.48 per cent, to end at 11,843.75. During the day, it hit a low of 11,830.25 and high of 12,039.80. Top losers in the Sensex pack included IndusInd Bank, Yes Bank, SBI, L&T, Tata Steel, M&M, Bajaj Finance, Vedanta, Tata Motors and RIL, tumbling up to 6.97 per cent. Bucking the negative market trend, Coal India, PowerGrid, NTPC, HUL, Hero MotoCorp, Asian Paints and Infosys gained up to 1.92 per cent. "The rate cut could not infuse positivity, and the decline steepened as focus shifted from policy rates to new emerging short-term tight liquidity situation due to issues like IL&FS, DHFL and its impending impact on other financial institutions if any," said Narendra Solanki, Head-Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers. Lowered GDP forecast for the current year and failure to get any cue from RBI on the liquidity front except general assurance of addressing the situation added to the selling pressure later in the day, he added. The Indian rupee fell marginally to 69.28 against the US dollar. Meanwhile, other Asian bourses ended on a mixed note, while Europe was trading in the green in opening deals. Brent crude futures, the global oil benchmark, fell 0.76 per cent to 61.09 per barrel.

Sensex dives 554 points despite RBI rate cut; financial stocks crack

The Reserve Bank of India(RBI) today cut benchmark lending rate by 0.25 per cent to 6 per cent.

The decision&nbsp;came as a relief for home loan buyers.

The RBI maintained a neutral stance on the monetary policy.

The central bank&nbsp;projected GDP growth for 2019-20 at 7.2 per cent. RBI revised downward retail inflation estimate to 2.4 per cent in Q4 FY19, 2.9-3 per cent in H1 FY20 and 3.5-3.8 per cent in H2 FY20.

Four out of six MPC members voted for the rate cut while the other two members favoured no change in repo rate, the RBI informed.

In February, the RBI had cut interest rates for the first time in 18 months by 25 basis points to 6.25 per cent. The move was as a result of low inflation at the time. Besides the repo rate, reverse repo was reduced to 6 per cent from 6.25 per cent.

Repo rate is the rate at which commercial banks borrow money from the RBI; while reverse repo rate is the rate at which RBI collects money from banks.

RBI had last hiked interest rates in August 2018 by 0.25 per cent. It came on back of a similar increase in June, 2018.

The Reserve Bank of India(RBI) today cut benchmark lending rate by 0.25 per cent to 6 per cent. The decision came as a relief for home loan buyers. The RBI maintained a neutral stance on the monetary policy.

The Reserve Bank of India(RBI) today cut benchmark lending rate by 0.25 per cent to 6 per cent. The decision came as a relief for home loan buyers. The RBI maintained a neutral stance on the monetary policy. The central bank projected GDP growth for 2019-20 at 7.2 per cent. RBI revised downward retail inflation estimate to 2.4 per cent in Q4 FY19, 2.9-3 per cent in H1 FY20 and 3.5-3.8 per cent in H2 FY20. Four out of six MPC members voted for the rate cut while the other two members favoured no change in repo rate, the RBI informed. In February, the RBI had cut interest rates for the first time in 18 months by 25 basis points to 6.25 per cent. The move was as a result of low inflation at the time. Besides the repo rate, reverse repo was reduced to 6 per cent from 6.25 per cent. Repo rate is the rate at which commercial banks borrow money from the RBI; while reverse repo rate is the rate at which RBI collects money from banks. RBI had last hiked interest rates in August 2018 by 0.25 per cent. It came on back of a similar increase in June, 2018.

RBI cuts lending rate by 0.25 per cent to 6 per cent; projects GDP growth for 2019-20 at 7.2%

<a href="http://www.wionews.com/business-economy/december-retail-inflation-rate-drops-to-219-lowest-since-june-2017-190234">Consumer inflation</a> in the month of February rose to 2.57 per cent, government data revealed on Tuesday. Consumer inflation was revised to 1.97 per cent in January this year from 2.05 per cent.&nbsp;

In a surprise move on February 7, the Reserve Bank of India's Monetary Policy Committee (MPC) cut the benchmark repo rate 25 basis points to 6.25 per cent, in its first cut in 18 months.

The MPC, which mainly monitors retail inflation data, also revised down its inflation projections for the period from April to September to 3.2 per cent to 3.4 per cent, from 3.8 per cent to 4.2 per cent.

Inflation pressures have eased in recent months, following falls in food and crude oil prices. India imports nearly 80 per cent of oil it consumes.

Meanwhile,&nbsp;India's industrial output in January rose 1.7 per cent from a year earlier, lower than forecast, government data showed on Tuesday.

January's growth was much slower than the upwardly revised 2.6 per cent year-on-year increase in December, the data showed.

(With inputs from Reuters)

Consumer inflation in the month of February rose to 2.57 per cent, government data revealed on Tuesday. Consumer inflation was revised to 1.97 per cent in January this year from 2.

Consumer inflation in the month of February rose to 2.57 per cent, government data revealed on Tuesday. Consumer inflation was revised to 1.97 per cent in January this year from 2.05 per cent. In a surprise move on February 7, the Reserve Bank of India's Monetary Policy Committee (MPC) cut the benchmark repo rate 25 basis points to 6.25 per cent, in its first cut in 18 months. The MPC, which mainly monitors retail inflation data, also revised down its inflation projections for the period from April to September to 3.2 per cent to 3.4 per cent, from 3.8 per cent to 4.2 per cent. Inflation pressures have eased in recent months, following falls in food and crude oil prices. India imports nearly 80 per cent of oil it consumes. Meanwhile, India's industrial output in January rose 1.7 per cent from a year earlier, lower than forecast, government data showed on Tuesday. January's growth was much slower than the upwardly revised 2.6 per cent year-on-year increase in December, the data showed. (With inputs from Reuters)

Retail inflation up to 2.57% in February: Government data

RBI cuts repo rate by 25 basis points to 6.25%

The Reserve Bank of India(RBI) today cut the <a href="http://www.wionews.com/business-economy/rbi-keeps-repo-rate-unchanged-at-65-retains-gdp-growth-projection-at-74-181654">repo rate by 25 basis points</a> to 6.25 per cent.

Repo rate is the interest at which the banks borrow from the central bank whenever it experiences a funds shortfall.&nbsp;

The central bank said in the financial year India's GDP growth was seen at 7.4 per cent against the government's forecast of 7.2 per cent.

Four of six members of the monetary policy committee (MPC) voted to cut the rates, while all six members voted for a change in the stance.&nbsp;Two MPC members Chetan Ghate and Viral Acharya were for status-quo in rates, the RBI informed.&nbsp;

The central bank had revised down headline inflation estimates to 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in Q3 of FY20.

The RBI&nbsp;revised downwards the retail inflation forecast to 2.8 per cent for the last quarter of the current fiscal on account of favourable factors including benign monsoon.

The RBI in its last bi-monthly monetary policy announcement for the current fiscal also lowered the retail inflation forecast for the first half of next fiscal beginning April, to 3.2-3.4 per cent.

For the third quarter of 2019-20, the inflation target is set at 3.9 per cent.&nbsp;The central bank raised limit of collateral-free agriculture loans to Rs 1.6 lakh from the&nbsp;current Rs 1 lakh.

"Several factors will shape the inflation path, going forward. First, food inflation has continued to surprise on the downside with continuing deflation across several items and a significant moderation in inflation in cereals. Several food groups are experiencing excess supply conditions domestically as well as internationally," RBI said.

Union budget proposals will boost demand by raising disposable incomes, but it may take time to play out, newly-appointed RBI governor&nbsp;Shaktikanta Das said in his first press conference.

"Looking beyond the current year, the growth outlook is likely to be influenced by... Aggregate bank credit; and overall financial flows to the commercial sector continue to be strong, but are yet to be broad-based," the MPC said.

It further said that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds.

"In particular, trade tensions and associated uncertainties appear to be moderating global growth," it said.

&nbsp;

&nbsp;

The Reserve Bank of India(RBI) today cut the repo rate by 25 basis points to 6.25 per cent. Repo rate is the interest at which the banks borrow from the central bank whenever it experiences a funds shortfall.

The Reserve Bank of India(RBI) today cut the repo rate by 25 basis points to 6.25 per cent. Repo rate is the interest at which the banks borrow from the central bank whenever it experiences a funds shortfall. The central bank said in the financial year India's GDP growth was seen at 7.4 per cent against the government's forecast of 7.2 per cent. Four of six members of the monetary policy committee (MPC) voted to cut the rates, while all six members voted for a change in the stance. Two MPC members Chetan Ghate and Viral Acharya were for status-quo in rates, the RBI informed. The central bank had revised down headline inflation estimates to 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in Q3 of FY20. The RBI revised downwards the retail inflation forecast to 2.8 per cent for the last quarter of the current fiscal on account of favourable factors including benign monsoon. The RBI in its last bi-monthly monetary policy announcement for the current fiscal also lowered the retail inflation forecast for the first half of next fiscal beginning April, to 3.2-3.4 per cent. For the third quarter of 2019-20, the inflation target is set at 3.9 per cent. The central bank raised limit of collateral-free agriculture loans to Rs 1.6 lakh from the current Rs 1 lakh. "Several factors will shape the inflation path, going forward. First, food inflation has continued to surprise on the downside with continuing deflation across several items and a significant moderation in inflation in cereals. Several food groups are experiencing excess supply conditions domestically as well as internationally," RBI said. Union budget proposals will boost demand by raising disposable incomes, but it may take time to play out, newly-appointed RBI governor Shaktikanta Das said in his first press conference. "Looking beyond the current year, the growth outlook is likely to be influenced by... Aggregate bank credit; and overall financial flows to the commercial sector continue to be strong, but are yet to be broad-based," the MPC said. It further said that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds. "In particular, trade tensions and associated uncertainties appear to be moderating global growth," it said.

RBI cuts key interest rates; projects GDP growth at 7.4%, limit of collateral-free agriculture loans increased

The Reserve Bank of India Wednesday left the repo rate unchanged while maintaining the stance of 'calibrated tightening' of policy.

The key rate remains unchanged at 6.5 per cent. This is for the second time in a row that the central bank did not tinker with the interest rate.

"The decision of the Monetary Policy Committee 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 per cent within a band of +/-2 per cent, while supporting growth," RBI said.

The central bank also retained the GDP growth projection for FY19 at 7.4 per cent.&nbsp;

For the first half of 2019-20, the GDP growth has been projected at 7.5 per cent.

RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2 per cent.

While the decision on keeping the policy rate unchanged was unanimous, Ravindra H Dholakia voted to change the stance to neutral.&nbsp;

The Reserve Bank of India Wednesday left the repo rate unchanged while maintaining the stance of 'calibrated tightening' of policy. The key rate remains unchanged at 6.

The Reserve Bank of India Wednesday left the repo rate unchanged while maintaining the stance of 'calibrated tightening' of policy. The key rate remains unchanged at 6.5 per cent. This is for the second time in a row that the central bank did not tinker with the interest rate. "The decision of the Monetary Policy Committee 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 per cent within a band of +/-2 per cent, while supporting growth," RBI said. The central bank also retained the GDP growth projection for FY19 at 7.4 per cent. For the first half of 2019-20, the GDP growth has been projected at 7.5 per cent. RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2 per cent. While the decision on keeping the policy rate unchanged was unanimous, Ravindra H Dholakia voted to change the stance to neutral.

RBI keeps repo rate unchanged at 6.5%, retains GDP growth projection at 7.4%

With headline inflation expected to remain benign in the second half of the current fiscal, a report Monday said the Reserve Bank of India (RBI) is likely to keep repo rate, or the rate at which it lends to the banks, unchanged in the rest of the fiscal.

The consumer price index (CPI)-based inflation fell to a one-year low of 3.31 per cent in October 2018, from 3.7 per cent in September 2018 and 3.58 per cent in October 2017.

The retail inflation number is the lowest since September 2017 when it had touched 3.28 per cent.

"Given the strong focus of the MPC (monetary policy committee) on the headline inflation print, which should remain benign for the rest of second half of FY19, we see limited scope for rate hikes in the rest of FY19," the Kotak Economic Research report said.

It expects headline inflation to be in the range of 2.8-4.3 per cent.

It can be noted that the apex bank had maintained a status quo in its October policy review after two consecutive rounds of rate hikes of 0.25 per cent each. The repo rate currently stands at 6.5 per cent.

The report, however, said it remains watchful of the upside risks to inflation emanating from pass-through of minimum support prices (MSPs), adverse movement in crude oil prices, volatility in global financial markets, lagged impact of the rupee weakness on input prices, adverse implications from fiscal slippage and staggered impact of HRA increases by states and its second-round impact.

"However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing the RBI with the comfort of staying on pause mode in the foreseeable future," it noted.

CPI inflation eased to 3.31 per cent in October, primarily led by contraction of 0.9 per cent in food inflation amid a sharp drop in the prices of vegetables and pulses.

On a sequential basis, food inflation contracted by 0.5 per cent month-on-month after contracting by 1.1 per cent in September.

Prices of fruits, vegetables, pulses, sugar and eggs continued to fall on a monthly basis.

Core inflation (including petrol and diesel) hardened to 6.1 per cent in October from 5.7 per cent in September due to increase in prices in segments such as household goods and services, health and personal care.&nbsp;

With headline inflation expected to remain benign in the second half of the current fiscal, a report Monday said the Reserve Bank of India (RBI) is likely to keep repo rate, or the rate at which it lends to the banks, unchanged in the rest of the fiscal.

With headline inflation expected to remain benign in the second half of the current fiscal, a report Monday said the Reserve Bank of India (RBI) is likely to keep repo rate, or the rate at which it lends to the banks, unchanged in the rest of the fiscal. The consumer price index (CPI)-based inflation fell to a one-year low of 3.31 per cent in October 2018, from 3.7 per cent in September 2018 and 3.58 per cent in October 2017. The retail inflation number is the lowest since September 2017 when it had touched 3.28 per cent. "Given the strong focus of the MPC (monetary policy committee) on the headline inflation print, which should remain benign for the rest of second half of FY19, we see limited scope for rate hikes in the rest of FY19," the Kotak Economic Research report said. It expects headline inflation to be in the range of 2.8-4.3 per cent. It can be noted that the apex bank had maintained a status quo in its October policy review after two consecutive rounds of rate hikes of 0.25 per cent each. The repo rate currently stands at 6.5 per cent. The report, however, said it remains watchful of the upside risks to inflation emanating from pass-through of minimum support prices (MSPs), adverse movement in crude oil prices, volatility in global financial markets, lagged impact of the rupee weakness on input prices, adverse implications from fiscal slippage and staggered impact of HRA increases by states and its second-round impact. "However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing the RBI with the comfort of staying on pause mode in the foreseeable future," it noted. CPI inflation eased to 3.31 per cent in October, primarily led by contraction of 0.9 per cent in food inflation amid a sharp drop in the prices of vegetables and pulses. On a sequential basis, food inflation contracted by 0.5 per cent month-on-month after contracting by 1.1 per cent in September. Prices of fruits, vegetables, pulses, sugar and eggs continued to fall on a monthly basis. Core inflation (including petrol and diesel) hardened to 6.1 per cent in October from 5.7 per cent in September due to increase in prices in segments such as household goods and services, health and personal care.

RBI may keep repo rate unchanged for remainder of fiscal year: Report

The Reserve Bank of India (RBI) held interest rates unchanged at a policy meeting on Friday, sending the rupee tumbling to a record low and stunning analysts who had expected a rate increase to combat inflationary pressures arising from high oil prices.

The RBI's monetary policy committee (MPC) left the repo rate at 6.50 per cent, though 35 out of 64 analysts surveyed by Reuters last week had forecast a rate hike.

The panel however, shifted its policy stance to 'calibrated tightening" from 'neutral'. Five of the six panel members voted to leave the rate unchanged.

"Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook," the RBI said in its policy statement, adding that it was vital "to further strengthen domestic macroeconomic fundamentals."

The MPC also held the reverse repo rate at 6.25 percent.

While the RBI kept its rates unchanged, analysts expect the central bank to raise rates by at least 50 basis points more going ahead, as inflationary pressures become more pronounced.

The Indian rupee weakened from 73.65 to hit an all-time low of 74.15 post the RBI policy, before stabilising around the 74 level.

The rupee has slumped in recent months amid a global rise in oil prices and a sell-off in emerging markets. It has fallen more than 13 percent since January, making it the worst performing major Asian emerging market currency.

The 10-year benchmark bond yield fell to 8.03 per cent from 8.13 per cent before the policy was announced, as traders expecting a rate hike were wrongfooted.

The Reserve Bank of India (RBI) held interest rates unchanged at a policy meeting on Friday, sending the rupee tumbling to a record low and stunning analysts who had expected a rate increase to combat inflationary pressures arising from high oil prices.

The Reserve Bank of India (RBI) held interest rates unchanged at a policy meeting on Friday, sending the rupee tumbling to a record low and stunning analysts who had expected a rate increase to combat inflationary pressures arising from high oil prices. The RBI's monetary policy committee (MPC) left the repo rate at 6.50 per cent, though 35 out of 64 analysts surveyed by Reuters last week had forecast a rate hike. The panel however, shifted its policy stance to 'calibrated tightening" from 'neutral'. Five of the six panel members voted to leave the rate unchanged. "Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook," the RBI said in its policy statement, adding that it was vital "to further strengthen domestic macroeconomic fundamentals." The MPC also held the reverse repo rate at 6.25 percent. While the RBI kept its rates unchanged, analysts expect the central bank to raise rates by at least 50 basis points more going ahead, as inflationary pressures become more pronounced. The Indian rupee weakened from 73.65 to hit an all-time low of 74.15 post the RBI policy, before stabilising around the 74 level. The rupee has slumped in recent months amid a global rise in oil prices and a sell-off in emerging markets. It has fallen more than 13 percent since January, making it the worst performing major Asian emerging market currency. The 10-year benchmark bond yield fell to 8.03 per cent from 8.13 per cent before the policy was announced, as traders expecting a rate hike were wrongfooted.

RBI keeps policy rate unchanged in surprise move

The six-member Monetary Policy Committee (MPC), headed by RBI governor Urjit Patel, began three-day deliberations Wednesday to decide on the key policy rates amid expectations that it would go for a 25 basis points hike to counter the impact of rising oil prices on inflation.

If the RBI raises the interest rate on Friday, it would be third in a row. It hiked key policy rate in this fiscal's second bi-monthly policy in June after a hiatus of four-and-a-half years. Subsequently, the RBI raised the repo rate or short-term lending rate by another 25 basis points in August policy meeting.

After two successive hikes, the repo rate currently stands at 6.50 per cent.

According to experts, rising crude oil prices, depreciating rupee and widening current account deficit are some of the factors the policy-making body would keep in mind while deciding on interest rates.

The rupee Wednesday weakened further to 73.25 against the US dollar while brent crude was trading near USD 85 per barrel.

"With petrol and diesel prices moving up, there is a strong expectation that inflation will also move up. So, they (RBI) may take a pre-emptive action. I feel there will be an increase of 25 basis points in the repo rate," Union Bank of India managing director and chief executive Rajkiran Rai G said.

Despite the rise in oil prices, the headline inflation number came down to 3.69 per cent for August as against 4.17 per cent for July.

The government has mandated the Reserve Bank to keep inflation within a band of 2-6 per cent.

Given the macroeconomic situation, the RBI is expected to raise the rate by 25 basis points in its upcoming policy review, another public sector bank head said.

Experts say the weaker trend in the rupee may also prompt the central bank to raise repo rate.

"Given where currency level is at this point of time, I think they will increase the interest rate by a quarter basis points," HDFC vice chairman and chief executive Keki Mistry said.

Tracking global developments, the rupee has become weak and is hovering around 73 against the dollar.

The SBI, in its research report Ecowrap, said the RBI should raise the policy repo rate by at least 25 basis points to arrest the rupee's fall.

"We rule out a hike of 50 basis points, as it may spook the market. However, there is a probability of change in neutral stance too, as three successive rate hikes with a neutral stance could contradict RBI message," the research report said.

The six-member Monetary Policy Committee (MPC), headed by RBI governor Urjit Patel, began three-day deliberations Wednesday to decide on the key policy rates amid expectations that it would go for a 25 basis points hike to counter the impact of rising oil prices on inflation.

The six-member Monetary Policy Committee (MPC), headed by RBI governor Urjit Patel, began three-day deliberations Wednesday to decide on the key policy rates amid expectations that it would go for a 25 basis points hike to counter the impact of rising oil prices on inflation. If the RBI raises the interest rate on Friday, it would be third in a row. It hiked key policy rate in this fiscal's second bi-monthly policy in June after a hiatus of four-and-a-half years. Subsequently, the RBI raised the repo rate or short-term lending rate by another 25 basis points in August policy meeting. After two successive hikes, the repo rate currently stands at 6.50 per cent. According to experts, rising crude oil prices, depreciating rupee and widening current account deficit are some of the factors the policy-making body would keep in mind while deciding on interest rates. The rupee Wednesday weakened further to 73.25 against the US dollar while brent crude was trading near USD 85 per barrel. "With petrol and diesel prices moving up, there is a strong expectation that inflation will also move up. So, they (RBI) may take a pre-emptive action. I feel there will be an increase of 25 basis points in the repo rate," Union Bank of India managing director and chief executive Rajkiran Rai G said. Despite the rise in oil prices, the headline inflation number came down to 3.69 per cent for August as against 4.17 per cent for July. The government has mandated the Reserve Bank to keep inflation within a band of 2-6 per cent. Given the macroeconomic situation, the RBI is expected to raise the rate by 25 basis points in its upcoming policy review, another public sector bank head said. Experts say the weaker trend in the rupee may also prompt the central bank to raise repo rate. "Given where currency level is at this point of time, I think they will increase the interest rate by a quarter basis points," HDFC vice chairman and chief executive Keki Mistry said. Tracking global developments, the rupee has become weak and is hovering around 73 against the dollar. The SBI, in its research report Ecowrap, said the RBI should raise the policy repo rate by at least 25 basis points to arrest the rupee's fall. "We rule out a hike of 50 basis points, as it may spook the market. However, there is a probability of change in neutral stance too, as three successive rate hikes with a neutral stance could contradict RBI message," the research report said.

RBI rate-setting panel begins three-day meet, may hike repo rate on Friday

The Reserve Bank of India has hiked its repo rate by 25 basis points to 6.25%.&nbsp;

This is the first hike in over four years.&nbsp;

The reverse repo rate has been hiked to 6.5%.&nbsp;

The repo rate is the rate of interest at which the RBI loans money to other banks. The repo rate then determines the rate of interest at which the banks loan money to their customers.&nbsp;

A hike in the repo rate will mean an increase in the EMIs of people who have borrowed money at fluctuating rates.&nbsp;

The reverse repo rate is the rate at which the RBI borrows money from the market.&nbsp;

<div class="ui-state-default" contenteditable="false">
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<blockquote class="twitter-tweet" data-lang="en">
Reserve Bank of India (RBI) projects inflation for 2018-19 at 4.8- 4.9% in first half and 4.7% in the second half of the year, projection for GDP is 7.5-7.6 in first half and 7.3-7.4 in the second half.
— ANI (@ANI) <a href="https://twitter.com/ANI/status/1004288695942254595?ref_src=twsrc%5Etfw">June 6, 2018</a></blockquote>
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The RBI meanwhile projected inflation for 2018-19 at 4.8- 4.9% in the first half and 4.7% in the second half of the year.&nbsp;

Its GDP projection was 7.5-7.6% for the first half and 7.3-7.4% in the second half.

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Gross domestic product (GDP) growth for 2017-18 has been revised & estimated at 6.7% backed by an all time high production of food grains and horticulture, strengthening of industrial growth and resilient services sector activity: RBI Guv Urjit Patel <a href="https://t.co/3Eam0qniRf">pic.twitter.com/3Eam0qniRf</a>
— ANI (@ANI) <a href="https://twitter.com/ANI/status/1004298584139841536?ref_src=twsrc%5Etfw">June 6, 2018</a></blockquote>
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This was the first hike in over 4 years. The reverse repo rate is now 6.5%

The Reserve Bank of India has hiked its repo rate by 25 basis points to 6.25%. This is the first hike in over four years. The reverse repo rate has been hiked to 6.5%. The repo rate is the rate of interest at which the RBI loans money to other banks. The repo rate then determines the rate of interest at which the banks loan money to their customers. A hike in the repo rate will mean an increase in the EMIs of people who have borrowed money at fluctuating rates. The reverse repo rate is the rate at which the RBI borrows money from the market. Reserve Bank of India (RBI) projects inflation for 2018-19 at 4.8- 4.9% in first half and 4.7% in the second half of the year, projection for GDP is 7.5-7.6 in first half and 7.3-7.4 in the second half. — ANI (@ANI) June 6, 2018 × The RBI meanwhile projected inflation for 2018-19 at 4.8- 4.9% in the first half and 4.7% in the second half of the year. Its GDP projection was 7.5-7.6% for the first half and 7.3-7.4% in the second half. Gross domestic product (GDP) growth for 2017-18 has been revised & estimated at 6.7% backed by an all time high production of food grains and horticulture, strengthening of industrial growth and resilient services sector activity: RBI Guv Urjit Patel pic.twitter.com/3Eam0qniRf — ANI (@ANI) June 6, 2018 ×

RBI hikes repo rate to 6.25%, EMIs to get costlier

The Reserve Bank of India kept its policy rates on hold for the fourth straight meeting on Thursday and retained its "neutral" stance even as inflationary pressures have eased more than expected.

The RBI kept its policy repo rate unchanged at 6.00 per cent, its lowest since November 2010.

The reverse repo rate also remained unchanged at 5.75 per cent.

Five of six members on the monetary policy committee voted for a hold, while one wanted a hike in the repo rate.

Inflation concerns have eased substantially following a crash in vegetable prices which is expected to keep price pressures soft for the next few months.

However, oil prices remain a risk, with India importing about 80 per cent of its crude requirement.

Bonds rose after the RBI's statement, while the rupee firmed and stocks extended early gains.

The 10-year benchmark bond yield fell to 7.19 per cent from 7.28 percent before the announcement, while the rupee was trading at 64.95 to the dollar from 65.04 before. The main market index was up 1.8 per cent.

INFLATION EASING, GROWTH

The RBI projected economic growth of 7.4 per cent for the current fiscal year that began on April 1.

It also lowered its April-September inflation projection to 4.7-5.1 per cent from February's 5.1-5.6 per cent.

After hitting a 17-month high in December, retail inflation eased for the second straight month in February and by more than expected, to a four-month low of 4.44 per cent. But it was still higher than the central bank's medium term target of 4 percent.

That has prompted most market watchers to push back their forecasts for a rate hike to early 2019, from earlier estimates of the second half of this year.

While inflation fears have eased in the short-term, the RBI sounded cautious and opted to wait for more data instead of giving a clear indication of its policy path.

"The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis," the RBI said in a statement.

The RBI is also mindful of the pace of India's economic recovery, after a loan-fraud scandal worth over $2 billion at the country's second largest state lender Punjab National Bank.

Greater regulatory scrutiny in the wake of the scandal could make banks more wary of lending, slowing down business activity after India's economy grew 7.2 percent in the October-December, its fastest in five quarters.

The reverse repo rate was also unchanged at 5.75 per cent.

The Reserve Bank of India kept its policy rates on hold for the fourth straight meeting on Thursday and retained its "neutral" stance even as inflationary pressures have eased more than expected. The RBI kept its policy repo rate unchanged at 6.00 per cent, its lowest since November 2010. The reverse repo rate also remained unchanged at 5.75 per cent. Five of six members on the monetary policy committee voted for a hold, while one wanted a hike in the repo rate. Inflation concerns have eased substantially following a crash in vegetable prices which is expected to keep price pressures soft for the next few months. However, oil prices remain a risk, with India importing about 80 per cent of its crude requirement. Bonds rose after the RBI's statement, while the rupee firmed and stocks extended early gains. The 10-year benchmark bond yield fell to 7.19 per cent from 7.28 percent before the announcement, while the rupee was trading at 64.95 to the dollar from 65.04 before. The main market index was up 1.8 per cent. INFLATION EASING, GROWTH The RBI projected economic growth of 7.4 per cent for the current fiscal year that began on April 1. It also lowered its April-September inflation projection to 4.7-5.1 per cent from February's 5.1-5.6 per cent. After hitting a 17-month high in December, retail inflation eased for the second straight month in February and by more than expected, to a four-month low of 4.44 per cent. But it was still higher than the central bank's medium term target of 4 percent. That has prompted most market watchers to push back their forecasts for a rate hike to early 2019, from earlier estimates of the second half of this year. While inflation fears have eased in the short-term, the RBI sounded cautious and opted to wait for more data instead of giving a clear indication of its policy path. "The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis," the RBI said in a statement. The RBI is also mindful of the pace of India's economic recovery, after a loan-fraud scandal worth over $2 billion at the country's second largest state lender Punjab National Bank. Greater regulatory scrutiny in the wake of the scandal could make banks more wary of lending, slowing down business activity after India's economy grew 7.2 percent in the October-December, its fastest in five quarters.

RBI keeps repo rate unchanged at 6%, cuts inflation forecast

The BSE Sensex rose over 600 points after the Reserve Bank of India kept its repo rate unchanged at 6 per cent. The reverse repo rate was also kept unchanged at 5.75 per cent.&nbsp

The Nifty meanwhile rose over 200 points.&nbsp

The bank had been expected to stick to its 'neutral' stance to support an early recovery in economic growth as inflation eases.&nbsp

The Sensex finally closed 577.73 points (1.75%) up at 33,596.80, while the Nifty closed 196.75 points (1.94%) up at 10,325.15.&nbsp

The stock market had been rising Thursday even before the central bank announced its new rates.&nbsp

The shares were tracking global equity markets that recovered after fears of a Sino-US trade war eased, with metal stocks such as Hindalco Industries Ltd and banks such as ICICI Bank Ltd among top gainers.

The United States expressed willingness to negotiate a resolution to the trade dispute with China after Beijing retaliated against proposed US tariffs on $50 billion in Chinese goods by targeting key American imports.

"All sectors which were impacted yesterday, including metals, are recovering today mainly because the fears of escalation in trade wars have receded, at least for the time-being," said Deepak Jasani, head of retail research at HDFC Securities.

(With inputs from Reuters)

The Sensex finally closed 577.73 points (1.75%) up at 33,596.80, while the Nifty closed 196.75 points (1.94%) up at 10,325.15

The BSE Sensex rose over 600 points after the Reserve Bank of India kept its repo rate unchanged at 6 per cent. The reverse repo rate was also kept unchanged at 5.75 per cent. The Nifty meanwhile rose over 200 points. The bank had been expected to stick to its 'neutral' stance to support an early recovery in economic growth as inflation eases. The Sensex finally closed 577.73 points (1.75%) up at 33,596.80, while the Nifty closed 196.75 points (1.94%) up at 10,325.15. The stock market had been rising Thursday even before the central bank announced its new rates. The shares were tracking global equity markets that recovered after fears of a Sino-US trade war eased, with metal stocks such as Hindalco Industries Ltd and banks such as ICICI Bank Ltd among top gainers. The United States expressed willingness to negotiate a resolution to the trade dispute with China after Beijing retaliated against proposed US tariffs on $50 billion in Chinese goods by targeting key American imports. "All sectors which were impacted yesterday, including metals, are recovering today mainly because the fears of escalation in trade wars have receded, at least for the time-being," said Deepak Jasani, head of retail research at HDFC Securities. (With inputs from Reuters)

Sensex rises over 600 points after RBI keeps lending rates unchanged

The Reserve Bank of India kept its policy rates on hold for the fourth straight meeting on Thursday and retained its "neutral" stance even as inflationary pressures have eased more than expected.

The RBI kept its policy repo rate unchanged at 6.00 percent, its lowest since November 2010, as unanimously expected by 61 respondents in a Reuters poll.

The reverse repo rate also remained unchanged at 5.75 percent. 
Five of six members on the monetary policy committee voted for a hold, while one wanted a hike in the repo rate.

Inflation concerns have eased substantially following a crash in vegetable prices which is expected to keep price pressures soft for the next few months.

However, oil prices remain a risk, with India importing about 80 percent of its crude requirement.

Bonds rose after the RBI`s statement, while the rupee firmed and stocks extended early gains.

The 10-year benchmark bond yield fell to 7.19 percent from 7.28 percent before the announcement, while the rupee was trading at 64.95 to the dollar from 65.04 before. The main market index was up 1.8 percent.

INFLATION EASING, GROWTH

The RBI projected economic growth of 7.4 percent for the current fiscal year that began on April 1.

It also lowered its April-September inflation projection to 4.7-5.1 percent from February`s 5.1-5.6 percent.

After hitting a 17-month high in December, retail inflation eased for the second straight month in February and by more than expected, to a four-month low of 4.44 percent. But it was still higher than the central bank's medium-term target of 4 percent.

That has prompted most market watchers to push back their forecasts for a rate hike to early 2019, from earlier estimates of the second half of this year.

While inflation fears have eased in the short-term, the RBI sounded cautious and opted to wait for more data instead of giving a clear indication of its policy path.

"The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis," the RBI said in a statement.

The RBI is also mindful of the pace of India`s economic recovery, after a loan-fraud scandal worth over $2 billion at the country`s second-largest state lender Punjab National Bank.

Greater regulatory scrutiny in the wake of the scandal could make banks more wary of lending, slowing down business activity after India`s economy grew 7.2 percent in the October-December, its fastest in five quarters.&nbsp;

RBI has kept the repo rate unchanged at 6% in the first monetary policy review of the current fiscal year, amid a gradual recovery in growth and easing inflation

The Reserve Bank of India kept its policy rates on hold for the fourth straight meeting on Thursday and retained its "neutral" stance even as inflationary pressures have eased more than expected. The RBI kept its policy repo rate unchanged at 6.00 percent, its lowest since November 2010, as unanimously expected by 61 respondents in a Reuters poll. The reverse repo rate also remained unchanged at 5.75 percent. Five of six members on the monetary policy committee voted for a hold, while one wanted a hike in the repo rate. Inflation concerns have eased substantially following a crash in vegetable prices which is expected to keep price pressures soft for the next few months. However, oil prices remain a risk, with India importing about 80 percent of its crude requirement. Bonds rose after the RBI`s statement, while the rupee firmed and stocks extended early gains. The 10-year benchmark bond yield fell to 7.19 percent from 7.28 percent before the announcement, while the rupee was trading at 64.95 to the dollar from 65.04 before. The main market index was up 1.8 percent. INFLATION EASING, GROWTH The RBI projected economic growth of 7.4 percent for the current fiscal year that began on April 1. It also lowered its April-September inflation projection to 4.7-5.1 percent from February`s 5.1-5.6 percent. After hitting a 17-month high in December, retail inflation eased for the second straight month in February and by more than expected, to a four-month low of 4.44 percent. But it was still higher than the central bank's medium-term target of 4 percent. That has prompted most market watchers to push back their forecasts for a rate hike to early 2019, from earlier estimates of the second half of this year. While inflation fears have eased in the short-term, the RBI sounded cautious and opted to wait for more data instead of giving a clear indication of its policy path. "The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis," the RBI said in a statement. The RBI is also mindful of the pace of India`s economic recovery, after a loan-fraud scandal worth over $2 billion at the country`s second-largest state lender Punjab National Bank. Greater regulatory scrutiny in the wake of the scandal could make banks more wary of lending, slowing down business activity after India`s economy grew 7.2 percent in the October-December, its fastest in five quarters.

RBI keeps repo rate unchanged at 6% in first bi-monthly monetary policy for 2018-19

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at its upcoming monetary policy review on April 5th. Despite downside surprises in the recent inflation readings, the Central Bank is likely to stay hawkish on account of two factors. One, there could be caution related to higher Minimum support prices (MSPs) that the government could offer to farmers in line with its budget ‘commitment’ and because of surging oil prices. Second, core inflation has become more broad-based and is markedly high for categories like services, said HDFC Bank treasury research paper today, adding that increase in components of salaries (like housing allowance) due for employees of the state governments could add to these pressures.&nbsp;

"We would also parse the commentary carefully for the RBI’s assessment of global risks such as an economically costly trade war between the US and its major trading partners, comments from the White House on dismantling or diluting trading arrangements like NAFTA, regulatory push-backs in industries like tech on the back of the recent controversy on data leaks, and finally geopolitical tensions with Russia and China (likely to flex their muscles) and the US taking a harder line on Iran and North Korea," said the paper, while adding that this may or may not directly lead to a change in monetary stance, but the central bank’s view on how prepared the domestic economy and markets are to face these risks become important. &nbsp;

The report said that change in the outlook of oil prices and emergence of new risks on the international front (trade-war etc.) could have a direct bearing on our exchange rate assumptions as well, and added, "We no longer expect the marginal degree of appreciation (Q2 vs. Q1) that we had previously pencilled in. We now expect the USD/INR pair to trade in the range of 64.5 – 65.5 in the short term." &nbsp;

Inflation Dynamics&nbsp;

In the February meeting, the RBI had revised its inflation forecast for the fourth quarter (2017-18) to 5.1% from 4.3%-4.7% earlier. Inflation print is now expected to be lower than the RBI’s estimate in Q4 (so far the average has been 4.8%). &nbsp;

Going ahead in FY19, CPI inflation could inch-up to around 5.6% in June. We expect average inflation of 5.1% in H1-FY19 with much of the rise likely to be on account of an adverse base. Thereafter, in 2H-FY19, while the base effect could be favourable and lead to some moderation in inflation, a lot would depend on how other factors pan out. Price of crude oil, potentially higher minimum support prices, the impact of housing rent allowance increase by several state governments, besides the performance of monsoon are some risks that could emerge in 2H-FY19, warranting a reasonable degree of caution by the RBI. &nbsp;

Given the recent softer inflation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19. Upside risks to inflation are detailed below:&nbsp;

1. Core inflation pressures building up&nbsp;

Rising core: Core inflation (excluding food, fuel and petrol and diesel) has been sticky in the past three months, remaining unchanged at 5.1%. Prior to this, it had gradually risen from 3.9% in June 2017 to 5.1% in December 2017.

<img alt="1111.PNG" data-entity-type="" data-entity-uuid="" height="430" src="https://images.wionews.com/iniline-images/1111.PNG" width="770" />

46% of the core items are seeing an upward pressure. (Source: CEIC, HDFC Bank)

&nbsp;

46% of the items in core are rising versus only 9% last year: Our analysis shows that between June 2017 and February 2018, 46% of the core items have seen upward pressures while 45% of the items have remained sticky. Only 9% of the items have seen a fall. This is in contrast to the trend seen between May 2016 and May 2017, when only 9% of the core items were rising while 44% of the items where seeing a downward pressure.&nbsp;

<img alt="2222.PNG" data-entity-type="" data-entity-uuid="" height="430" src="https://images.wionews.com/iniline-images/2222.PNG" width="770" />

Service inflation has been risen more than manufacturing. (Source: CEIC, HDFC Bank)

Services inflation is leading the upswing, rising to 5.7% in February from 4.4% in the beginning of the financial year (April 2017). This indicates that any downside pressures due to the introduction of GST on service prices, as was expected, has been offset by other core items or has not filtered through to retail prices.&nbsp;

2. Return of oil pressures: Crude oil prices posted their biggest weekly gain in eight months with rising geopolitical risk in the Middle East and Saudi Arabia hinting that the current OPEC output cuts could be extended into 2019.&nbsp;

MSPs risk: In the Union Budget 2018-19, the government had announced that MSPs will be set at 1.5 times the cost of production. The impact of this increase is dependent on the definition of cost used. According to our estimates, a 1.5 times increase over the A2+FL costs could lead to a 5060bps increase in headline inflation. The RBI has also highlighted the increase in MSPs as a key risk in the past and is likely to reiterate the same in the April 5 policy meeting. That said, the RBI is likely to wait and watch before the final decision on MSPs is announced in May this year, before making changes to its stance or forecasts. &nbsp;&nbsp;

Global Dynamics&nbsp;

Change in the outlook of oil prices and the emergence of new risks on the international front (trade-war etc.) could have a direct bearing on the exchange rate assumptions and thus on the overall monetary policy equation of the RBI. &nbsp;

The report summed up saying "there are global factors that the RBI needs to watch out for, and perhaps act during phases of extreme volatility. Rupee movement in 2018 is likely to be marginal in our view but it’s important to keep a tad of exchange rate risks in an environment of tightening monetary policies globally and rising concerns of a full-blown trade war. Therefore, a status-quo for the major part of the year is the most likely scenario for the RBI. The rate hike could happen in the last quarter of FY19." &nbsp;

India Inc expects the Reserve Bank of India (RBI) to maintain its hawkish stance in its first bi-monthly monetary policy review of the new fiscal.

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at its upcoming monetary policy review on April 5th. Despite downside surprises in the recent inflation readings, the Central Bank is likely to stay hawkish on account of two factors. One, there could be caution related to higher Minimum support prices (MSPs) that the government could offer to farmers in line with its budget ‘commitment’ and because of surging oil prices. Second, core inflation has become more broad-based and is markedly high for categories like services, said HDFC Bank treasury research paper today, adding that increase in components of salaries (like housing allowance) due for employees of the state governments could add to these pressures. "We would also parse the commentary carefully for the RBI’s assessment of global risks such as an economically costly trade war between the US and its major trading partners, comments from the White House on dismantling or diluting trading arrangements like NAFTA, regulatory push-backs in industries like tech on the back of the recent controversy on data leaks, and finally geopolitical tensions with Russia and China (likely to flex their muscles) and the US taking a harder line on Iran and North Korea," said the paper, while adding that this may or may not directly lead to a change in monetary stance, but the central bank’s view on how prepared the domestic economy and markets are to face these risks become important. The report said that change in the outlook of oil prices and emergence of new risks on the international front (trade-war etc.) could have a direct bearing on our exchange rate assumptions as well, and added, "We no longer expect the marginal degree of appreciation (Q2 vs. Q1) that we had previously pencilled in. We now expect the USD/INR pair to trade in the range of 64.5 – 65.5 in the short term." Inflation Dynamics In the February meeting, the RBI had revised its inflation forecast for the fourth quarter (2017-18) to 5.1% from 4.3%-4.7% earlier. Inflation print is now expected to be lower than the RBI’s estimate in Q4 (so far the average has been 4.8%). Going ahead in FY19, CPI inflation could inch-up to around 5.6% in June. We expect average inflation of 5.1% in H1-FY19 with much of the rise likely to be on account of an adverse base. Thereafter, in 2H-FY19, while the base effect could be favourable and lead to some moderation in inflation, a lot would depend on how other factors pan out. Price of crude oil, potentially higher minimum support prices, the impact of housing rent allowance increase by several state governments, besides the performance of monsoon are some risks that could emerge in 2H-FY19, warranting a reasonable degree of caution by the RBI. Given the recent softer inflation prints while the RBI can afford to wait longer and maintain status quo, eventually, we believe, that elevation of some of the upside risks along with the revival in rural demand could lead to a rate hike by the last quarter of 2018-19. Upside risks to inflation are detailed below: 1. Core inflation pressures building up Rising core: Core inflation (excluding food, fuel and petrol and diesel) has been sticky in the past three months, remaining unchanged at 5.1%. Prior to this, it had gradually risen from 3.9% in June 2017 to 5.1% in December 2017. 46% of the core items are seeing an upward pressure. (Source: CEIC, HDFC Bank) 46% of the items in core are rising versus only 9% last year: Our analysis shows that between June 2017 and February 2018, 46% of the core items have seen upward pressures while 45% of the items have remained sticky. Only 9% of the items have seen a fall. This is in contrast to the trend seen between May 2016 and May 2017, when only 9% of the core items were rising while 44% of the items where seeing a downward pressure. Service inflation has been risen more than manufacturing. (Source: CEIC, HDFC Bank) Services inflation is leading the upswing, rising to 5.7% in February from 4.4% in the beginning of the financial year (April 2017). This indicates that any downside pressures due to the introduction of GST on service prices, as was expected, has been offset by other core items or has not filtered through to retail prices. 2. Return of oil pressures: Crude oil prices posted their biggest weekly gain in eight months with rising geopolitical risk in the Middle East and Saudi Arabia hinting that the current OPEC output cuts could be extended into 2019. MSPs risk: In the Union Budget 2018-19, the government had announced that MSPs will be set at 1.5 times the cost of production. The impact of this increase is dependent on the definition of cost used. According to our estimates, a 1.5 times increase over the A2+FL costs could lead to a 5060bps increase in headline inflation. The RBI has also highlighted the increase in MSPs as a key risk in the past and is likely to reiterate the same in the April 5 policy meeting. That said, the RBI is likely to wait and watch before the final decision on MSPs is announced in May this year, before making changes to its stance or forecasts. Global Dynamics Change in the outlook of oil prices and the emergence of new risks on the international front (trade-war etc.) could have a direct bearing on the exchange rate assumptions and thus on the overall monetary policy equation of the RBI. The report summed up saying "there are global factors that the RBI needs to watch out for, and perhaps act during phases of extreme volatility. Rupee movement in 2018 is likely to be marginal in our view but it’s important to keep a tad of exchange rate risks in an environment of tightening monetary policies globally and rising concerns of a full-blown trade war. Therefore, a status-quo for the major part of the year is the most likely scenario for the RBI. The rate hike could happen in the last quarter of FY19."

Repo rate likely to remain unchanged in monetary policy review: HDFC Bank report

The Reserve Bank of India has decided to keep the repo rate and the reverse repo rate unchanged at 6 per cent and 5.75 per cent respectively for a third straight policy meeting.&nbsp;

The RBI retained its &quot;neutral&quot; stance on the interest rates with an aim to support economic growth even as inflation accelerated to a 17-month high.

Repo rate is the rate at which the RBI lends out finances to the banking sector while the reverse repo rate is the opposite of the same.&nbsp;

According to experts, a hike in the interest rates would have translated into an increase in inflation and escalating crude oil prices.&nbsp;

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WATCH: RBI Governor Urjit Patel addresses the media in Mumbai <a href="https://t.co/BRq38Fyypb">https://t.co/BRq38Fyypb</a>
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The Monetary Policy Committee (MPC) of the Reserve Bank of India had kept the interest rate unchanged in December over looming concerns of price rise.&nbsp;

RBI Governor Urjit Patel chaired the Monetary Policy Committee meeting today at 2.30pm.

&ldquo;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% within a band of +/- 2% while supporting growth,&rdquo; RBI noted.

&quot;The policy decision is in line with our expectation along with the hawkishness that is built into the statement. While we retain status quo from RBI for FY19, a risk to our call may come from higher inflation,&quot; shared Aditi Nayar, Principal Economist, ICRA Ltd in Gurgaon.&nbsp;

&quot;Despite the upward revision in the inflation forecast and concerns highlighted regarding growing inflation risks amid the crystallization of the fiscal slippage, the tone of the policy was not as hawkish as expected, given the comment that the nascent recovery needs to be carefully nurtured,&quot; Radhika Rao, Group Economist, DBS, Singapore told Reuters.&nbsp;

Ahead of the RBI&#39;s announcement, the Indian rupee traded down 11 paise against the US dollar at 64.14.&nbsp;

RBI Governor Urjit Patel chaired the Monetary Policy Committee meeting today at 2.30pm

The Reserve Bank of India has decided to keep the repo rate and the reverse repo rate unchanged at 6 per cent and 5.75 per cent respectively for a third straight policy meeting. The RBI retained its "neutral" stance on the interest rates with an aim to support economic growth even as inflation accelerated to a 17-month high. Repo rate is the rate at which the RBI lends out finances to the banking sector while the reverse repo rate is the opposite of the same. According to experts, a hike in the interest rates would have translated into an increase in inflation and escalating crude oil prices. WATCH: RBI Governor Urjit Patel addresses the media in Mumbai https://t.co/BRq38Fyypb — ANI (@ANI) February 7, 2018 × The Monetary Policy Committee (MPC) of the Reserve Bank of India had kept the interest rate unchanged in December over looming concerns of price rise. RBI Governor Urjit Patel chaired the Monetary Policy Committee meeting today at 2.30pm. “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% within a band of +/- 2% while supporting growth,” RBI noted. "The policy decision is in line with our expectation along with the hawkishness that is built into the statement. While we retain status quo from RBI for FY19, a risk to our call may come from higher inflation," shared Aditi Nayar, Principal Economist, ICRA Ltd in Gurgaon. "Despite the upward revision in the inflation forecast and concerns highlighted regarding growing inflation risks amid the crystallization of the fiscal slippage, the tone of the policy was not as hawkish as expected, given the comment that the nascent recovery needs to be carefully nurtured," Radhika Rao, Group Economist, DBS, Singapore told Reuters. Ahead of the RBI's announcement, the Indian rupee traded down 11 paise against the US dollar at 64.14.

RBI leaves repo rate, reverse repo rate unchanged at 6 & 5.75%

The Reserve Bank of India, meeting amid a global market storm, is widely expected to keep its key rate on hold on Wednesday, but toughen its rhetoric as inflation has accelerated sharply, making an increasing number of analysts see a hike this year. 
 
A Reuters poll showed 58 of 60 economists expect the repo rate to be kept at 6.00 per cent, the lowest since November 2010, and the reverse repo rate at 5.75 per cent. The other two predicted a 25 basis points hike. 
 
But more analysts now believe tightening looms down the road after surging oil and food prices led consumer inflation in the country to a 17-month high of 5.21 per cent in December - well above the RBI&#39;s 4 per cent target. 
 
Inflation is expected to accelerate after the government&#39;s budget last week widened its fiscal deficit target for the fiscal year starting in April to help finance a sharp increase in spending in the rural areas and on healthcare. 
 
Bond investors are already pricing in rate hikes, with benchmark 10-year bond yields rising over 80 basis points since July, the biggest move since the 2013 rupee crisis. 
 
The Reuters poll showed 14 out of 35 analysts believe the RBI will hike rates by the end of 2018, up from 7 out of 27 in December.

New inflation risks?

But questions remain about how soon the RBI can tighten, given the economy is expected to grow only 6.7 per cent in the current fiscal year - the slowest pace in about three years.

The RBI&#39;s policy stance is currently &quot;neutral&quot;.

&quot;New inflation risks are emerging post-budget, so it will have to sound hawkish - but not overly so,&quot; BNP Paribas told clients on Tuesday, adding it expects two 25-bps rate hikes in 2018&#39;s second half.

The RBI has held the repo at 6.0 per cent since a 25 bps cut in August, having taken advantage of a period of extraordinary low inflation to cut rates by 200 bps since early 2015.

For sure, a rate hike in 2018 is far from certain, as the RBI has to be careful not to slow an economy that needs rapid growth to create jobs. The RBI will also be mindful of the global economy, in case of a sharp downturn that impacts India.

Although any move to raise rates could make yields more attractive overseas, it could also undermine confidence in the economy, adding more uncertainty to monetary policy.

Inflation is expected to accelerate after the government’s budget last week widened its fiscal deficit target for the fiscal year starting in April to help finance a sharp increase in spending in the rural areas and on healthcare

The Reserve Bank of India, meeting amid a global market storm, is widely expected to keep its key rate on hold on Wednesday, but toughen its rhetoric as inflation has accelerated sharply, making an increasing number of analysts see a hike this year. A Reuters poll showed 58 of 60 economists expect the repo rate to be kept at 6.00 per cent, the lowest since November 2010, and the reverse repo rate at 5.75 per cent. The other two predicted a 25 basis points hike. But more analysts now believe tightening looms down the road after surging oil and food prices led consumer inflation in the country to a 17-month high of 5.21 per cent in December - well above the RBI's 4 per cent target. Inflation is expected to accelerate after the government's budget last week widened its fiscal deficit target for the fiscal year starting in April to help finance a sharp increase in spending in the rural areas and on healthcare. Bond investors are already pricing in rate hikes, with benchmark 10-year bond yields rising over 80 basis points since July, the biggest move since the 2013 rupee crisis. The Reuters poll showed 14 out of 35 analysts believe the RBI will hike rates by the end of 2018, up from 7 out of 27 in December. New inflation risks? But questions remain about how soon the RBI can tighten, given the economy is expected to grow only 6.7 per cent in the current fiscal year - the slowest pace in about three years. The RBI's policy stance is currently "neutral". "New inflation risks are emerging post-budget, so it will have to sound hawkish - but not overly so," BNP Paribas told clients on Tuesday, adding it expects two 25-bps rate hikes in 2018's second half. The RBI has held the repo at 6.0 per cent since a 25 bps cut in August, having taken advantage of a period of extraordinary low inflation to cut rates by 200 bps since early 2015. For sure, a rate hike in 2018 is far from certain, as the RBI has to be careful not to slow an economy that needs rapid growth to create jobs. The RBI will also be mindful of the global economy, in case of a sharp downturn that impacts India. Although any move to raise rates could make yields more attractive overseas, it could also undermine confidence in the economy, adding more uncertainty to monetary policy.

RBI expected to keep rates on hold in policy decision

Fuelled by soaring food prices, retail inflation climbed to a 15-month high of 4.88% in November.

It was at 3.58 % in October.

The figure is higher than the Reserve Bank of India&#39;s 4% medium-term target, reducing room for the central bank to change the repo rate -- the rate at which the central bank lends money to commercial banks -- in the near future.&nbsp;

Economists polled by Reuters had predicted consumer inflation would rise to 4.2 % in November, following unseasonably heavy rains which increased food prices.

Also read:&nbsp;<a href="http://www.wionews.com/business-economy/indias-economy-to-grow-at-72-in-2018-un-26543" target="_blank">India&#39;s economy to grow at 7.2% in 2018, says UN</a>

Industrial output growth meanwhile slowed to 2.2% in October from 3.8% in September, with demand continuing to suffer from the&nbsp;disruption caused by the rollout of the new Goods and Services Tax (GST). &nbsp;&nbsp;

At its December 6 policy meeting, the RBI raised its inflation projection by 10 basis points to between 4.3% to 4.7 % for the six months ending in March.

&nbsp;

The number is higher than the RBI's 4% medium-term target

Fuelled by soaring food prices, retail inflation climbed to a 15-month high of 4.88% in November. It was at 3.58 % in October. The figure is higher than the Reserve Bank of India's 4% medium-term target, reducing room for the central bank to change the repo rate -- the rate at which the central bank lends money to commercial banks -- in the near future. Economists polled by Reuters had predicted consumer inflation would rise to 4.2 % in November, following unseasonably heavy rains which increased food prices. Also read: India's economy to grow at 7.2% in 2018, says UN Industrial output growth meanwhile slowed to 2.2% in October from 3.8% in September, with demand continuing to suffer from the disruption caused by the rollout of the new Goods and Services Tax (GST). At its December 6 policy meeting, the RBI raised its inflation projection by 10 basis points to between 4.3% to 4.7 % for the six months ending in March.

Retail inflation hits 15-month high of 4.88% in November

The Reserve Bank of India kept its repo rate at 6.25 per cent for a third consecutive policy meeting on Thursday as it continues to guard against any potential flare-up in inflation and an uncertain global economic environment.

RBI has projected inflation at 4.5 per cent for first half of&nbsp;2017-18 and 5 per cent for the second half of the year. &quot;Upside risk to inflation arises from one-off effect of&nbsp;Goods and Services Tax,&quot;&nbsp;RBI chief Urjit Patel, RBI governor said at a press conference.&nbsp;

Several indicators point to modest improvement in&nbsp;micro-economic outlook,&nbsp;RBI&nbsp;governor added.

The central bank has projected&nbsp;GDP growth at 7.4 per cent for the current&nbsp;fiscal, up from 6.7 per cent in 2016-17.&nbsp;Urjit Patel said risk is evenly balanced around inflation trajectory with&nbsp;upside&nbsp;risk from uncertainty about monsoon. 
 
(WION with agency&nbsp;inputs)

The Reserve Bank of India kept its repo rate unchanged for a third consecutive policy meeting

The Reserve Bank of India kept its repo rate at 6.25 per cent for a third consecutive policy meeting on Thursday as it continues to guard against any potential flare-up in inflation and an uncertain global economic environment. RBI has projected inflation at 4.5 per cent for first half of 2017-18 and 5 per cent for the second half of the year. "Upside risk to inflation arises from one-off effect of Goods and Services Tax," RBI chief Urjit Patel, RBI governor said at a press conference. Several indicators point to modest improvement in micro-economic outlook, RBI governor added. The central bank has projected GDP growth at 7.4 per cent for the current fiscal, up from 6.7 per cent in 2016-17. Urjit Patel said risk is evenly balanced around inflation trajectory with upside risk from uncertainty about monsoon. (WION with agency inputs)

India's central bank keeps repo rate on hold at 6.25%, projects inflation at 5%

Indian shares traded flat on Wednesday, paring gains after the NSE Nifty hit a record high at the open, as investors took a breather ahead of the central bank policy meet due this week.

The monetary policy committee of the Reserve Bank of India (RBI) is likely to leave the repo rate at 6.25 per cent, where it has been since October, a Reuters poll found.

However, investors are expecting the RBI to announce measures to drain the 4 trillion rupees that have accumulated in the banking system in March, double as compared with January.

&quot;The market is moving slightly ahead of time, so it is taking a small breather. One might see some profit-booking as well,&quot; said Deven Choksey, managing director, K R Choksey Investment Managers.

The broader Nifty was up 0.17 per cent at 9,253.30, as of 0617 GMT, after earlier hitting an all-time high of 9,264.95.

The benchmark BSE Sensex was 0.12 per cent higher at 29,946.83. It went as high as 30,007.48, just 17.26 points shy of its record peak of 30,024.74 touched on March 4, 2015.

Housing Development Finance Corp dropped as much as 2.25 per cent.&nbsp;

Among gainers, Shankara Building Products Ltd surged as much as 37 per cent on its market debut, with its up to 3.45 billion rupees ($52.96 million) IPO oversubscribed more than 41 times.

Shares of Titan Company Ltd hit a record high after it said consumer sentiment has recovered in January-March quarter and sales were good for all divisions.

TVS Motor Company rose as much as 2.72 per cent to a record high after posting a 10 per cent increase in total vehicle sales for March 2017.&nbsp;

Indian stock, bonds and currency markets were closed on Tuesday for a market holiday.

(Reuters)

Investors are expecting the RBI to announce measures to drain the 4 trillion rupees that have accumulated in the banking system in March

Indian shares traded flat on Wednesday, paring gains after the NSE Nifty hit a record high at the open, as investors took a breather ahead of the central bank policy meet due this week. The monetary policy committee of the Reserve Bank of India (RBI) is likely to leave the repo rate at 6.25 per cent, where it has been since October, a Reuters poll found. However, investors are expecting the RBI to announce measures to drain the 4 trillion rupees that have accumulated in the banking system in March, double as compared with January. "The market is moving slightly ahead of time, so it is taking a small breather. One might see some profit-booking as well," said Deven Choksey, managing director, K R Choksey Investment Managers. The broader Nifty was up 0.17 per cent at 9,253.30, as of 0617 GMT, after earlier hitting an all-time high of 9,264.95. The benchmark BSE Sensex was 0.12 per cent higher at 29,946.83. It went as high as 30,007.48, just 17.26 points shy of its record peak of 30,024.74 touched on March 4, 2015. Housing Development Finance Corp dropped as much as 2.25 per cent. Among gainers, Shankara Building Products Ltd surged as much as 37 per cent on its market debut, with its up to 3.45 billion rupees ($52.96 million) IPO oversubscribed more than 41 times. Shares of Titan Company Ltd hit a record high after it said consumer sentiment has recovered in January-March quarter and sales were good for all divisions. TVS Motor Company rose as much as 2.72 per cent to a record high after posting a 10 per cent increase in total vehicle sales for March 2017. Indian stock, bonds and currency markets were closed on Tuesday for a market holiday. (Reuters)

Before RBI policy review, markets take cautious approach

The Reserve Bank of India has pulled surprises at its last three policy meetings, so another can&#39;t be ruled out at Thursday&#39;s review, but analysts uniformly expect no change in interest rates.

All 60 economists polled by Reuters predict the RBI&#39;s six-member monetary policy committee (MPC) will leave the repo rate at 6.25 per cent, where it has been since October.

Investors will scrutinise the statement for the MPC&#39;s views on consumer inflation after prices advanced 3.65 percent in February from a year earlier, not far below the RBI&#39;s target of 4 percent.

A session whose results match expectations would be a break for investors after the RBI stunned markets in each of the three meetings so far where decisions were made by the MPC, instead of by the governor.

In October, the MPC unexpectedly cut rates and then it held them in December when markets were betting on an easing move.

In February, the committee again surprised by holding rates and switching to a &quot;neutral&quot; stance from &quot;accommodative&quot; - a move that made bond yields spike. All decisions were taken by a unanimous 6-0 vote, adding to the surprise.

On Thursday, &quot;we expect the MPC to maintain its neutral stance, with caution being the watchword on external factors,&quot; said A. Prasanna, an economist at ICICI Securities Primary Dealership.

Split on inflation

Though analysts agree rates will be held on Thursday, they are split on inflation and its implications for later: 21 of 34 economists predict stable prices should allow the RBI to cut rates this year.

But others fear food prices will spike should the country see below-average rains during the monsoon season in the middle of the year, ensuring rates stay on hold through 2017.

The RBI is also likely to say it continues to monitor global markets as the U.S. Federal Reserve&#39;s tightening gives pause to central banks around the world, while dealing at home with a surge in cash at banks after the country&#39;s ban on some banknotes last year led to a surge in deposits.

To justify a rate cut this year, the RBI would likely need more comfort on consumer prices, either through a slump in food costs or an easing of core inflation, which has stayed at around 5 percent for several months.

The RBI also needs to reduce the around 4 trillion rupees ($61.59 billion) accumulated in the banking system in March, doubling from the January.

The government, mindful of the impact on inflation, has already indicated it is considering acting with the RBI in implementing a special facility to drain the extra liquidity.

Meanwhile, the RBI will likely tread carefully at a time most central banks in Asia are keeping their key rates on hold.

India appears in good stead after attracting $8.85 billion in investment into debt and equities in March - the most since at least 2002 - sending the broader NSE share index to a record high and the rupee to a nearly 1-1/2 year high.

But the RBI has long worried about any sudden reversals of foreign flows, further making a change in rates unlikely on Thursday, analysts said.&nbsp;

(Reuters)

The bank is expected to leave the repo rate at 6.25 per cent, where it has been since October

The Reserve Bank of India has pulled surprises at its last three policy meetings, so another can't be ruled out at Thursday's review, but analysts uniformly expect no change in interest rates. All 60 economists polled by Reuters predict the RBI's six-member monetary policy committee (MPC) will leave the repo rate at 6.25 per cent, where it has been since October. Investors will scrutinise the statement for the MPC's views on consumer inflation after prices advanced 3.65 percent in February from a year earlier, not far below the RBI's target of 4 percent. A session whose results match expectations would be a break for investors after the RBI stunned markets in each of the three meetings so far where decisions were made by the MPC, instead of by the governor. In October, the MPC unexpectedly cut rates and then it held them in December when markets were betting on an easing move. In February, the committee again surprised by holding rates and switching to a "neutral" stance from "accommodative" - a move that made bond yields spike. All decisions were taken by a unanimous 6-0 vote, adding to the surprise. On Thursday, "we expect the MPC to maintain its neutral stance, with caution being the watchword on external factors," said A. Prasanna, an economist at ICICI Securities Primary Dealership. Split on inflation Though analysts agree rates will be held on Thursday, they are split on inflation and its implications for later: 21 of 34 economists predict stable prices should allow the RBI to cut rates this year. But others fear food prices will spike should the country see below-average rains during the monsoon season in the middle of the year, ensuring rates stay on hold through 2017. The RBI is also likely to say it continues to monitor global markets as the U.S. Federal Reserve's tightening gives pause to central banks around the world, while dealing at home with a surge in cash at banks after the country's ban on some banknotes last year led to a surge in deposits. To justify a rate cut this year, the RBI would likely need more comfort on consumer prices, either through a slump in food costs or an easing of core inflation, which has stayed at around 5 percent for several months. The RBI also needs to reduce the around 4 trillion rupees ($61.59 billion) accumulated in the banking system in March, doubling from the January. The government, mindful of the impact on inflation, has already indicated it is considering acting with the RBI in implementing a special facility to drain the extra liquidity. Meanwhile, the RBI will likely tread carefully at a time most central banks in Asia are keeping their key rates on hold. India appears in good stead after attracting $8.85 billion in investment into debt and equities in March - the most since at least 2002 - sending the broader NSE share index to a record high and the rupee to a nearly 1-1/2 year high. But the RBI has long worried about any sudden reversals of foreign flows, further making a change in rates unlikely on Thursday, analysts said. (Reuters)

RBI seen holding rates at Thursday review, not pulling another surprise

The Reserve Bank of India (RBI) kept its repo rate on hold at 6.25 per cent for a second straight policy meeting, opting to wait for more clarity on inflation trends and on how a radical crackdown on &quot;black money&quot; is impacting economic growth.

The RBI&#39;s monetary policy committee on Wednesday voted 6-0, its third unanimous decision in a row since being established in September.

Before the meeting, analysts were split on what the RBI would do. In a Reuters poll last week, 28 of 46 participants saw the central bank cutting the repo rate by a quarter point and two expected a 50 bps cut.

But others correctly predicted the RBI would wait until its next policy review in April. 
 
(Reuters) 
&nbsp;

RBI is opting to wait for more clarity on inflation trends and on how a radical crackdown on 'black money' is impacting economic growth

The Reserve Bank of India (RBI) kept its repo rate on hold at 6.25 per cent for a second straight policy meeting, opting to wait for more clarity on inflation trends and on how a radical crackdown on "black money" is impacting economic growth. The RBI's monetary policy committee on Wednesday voted 6-0, its third unanimous decision in a row since being established in September. Before the meeting, analysts were split on what the RBI would do. In a Reuters poll last week, 28 of 46 participants saw the central bank cutting the repo rate by a quarter point and two expected a 50 bps cut. But others correctly predicted the RBI would wait until its next policy review in April. (Reuters)

RBI keeps repo rate unchanged at 6.25% for second meeting in a row

The rate-setting Monetary Policy Committee (MPC) today began its third review meeting amid mixed expectations of possible rate cut by the Reserve Bank of India.

Expert opinions were divided if the RBI Governor-led panel will recommend cut in interest rate by 0.25 per cent to give fillip to growth or maintain status quo because of inflationary pressure from rising oil prices.

Banks are flush with low cost deposits on account of demonetisation of high value currency notes of Rs 500 and 1,000, as a result of which their lending rates fell by up to 1 per cent last month.

Although banks and industry have been pitching for cut in benchmark repo rate (short-term lending rate), the six-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel may adopt a cautious approach on February 8, especially in view of spike in crude oil prices and growing protectionist sentiment with Donald Trump taking charge as the US President.

Oil (Brent) prices have risen to USD 56.8 per barrel, while President Trump has announced a host of protectionist measures which will impact the global economy, including India.

According to PNB Managing Director Usha Ananthasubramanian there is an all-round expectation of 25 basis points cut in interest rate.

However, the transmission has already taken place and the further rate cut would depend on how long this low cost deposits stays with the bank.

&quot;Most of the banks have already front-loaded rate cut and if need be there would be further rate cut,&quot; she said.

In Patel&#39;s first policy review as RBI Governor in October, which was also the maiden review of the MPC, the repo rate was reduced by 0.25 per cent to 6.25 per cent.

In the following policy meet in December, the repo rate was retained at 6.25 per cent. However, RBI has cut repo by 1.75 per cent since January 2015.

&quot;We are expecting 25 basis points cut in repo rate because macroeconomic factors like inflation, fiscal deficit are conducive for reduction. Given the growth-oriented budget, there is a widespread speculation that RBI would respond in the same spirit,&quot; Bank of Maharashtra Executive Director R K Gupta said.

There are expectations of 25 basis point rate cut as there is excess liquidity in the system, UCO Bank MD CEO R K Takkar said.

Bandhan Bank Chairman and Managing Director Chandra Shekhar Ghosh said that the RBI is unlikely to cut rate as banks are flush with funds.

According to industry body Ficci, the RBI is likely to maintain status quo in the upcoming monetary policy meet and cut rates in the first half of fiscal year 2017-18.

Rising for the fifth straight month, retail inflation or CPI quickened to 5.61 per cent in December, mainly on costlier vegetables and cereals, limiting the headroom for the RBI to lower rates.

However, WPI or wholesale inflation fell in December but the rate of decline at 0.73 per cent was the slowest in last one year as food prices shot up, indicating return of inflationary pressures.&nbsp;

(PTI)

Banks are flush with low-cost deposits on account of demonetisation as a result of which their lending rates fell by up to 1% last month

The rate-setting Monetary Policy Committee (MPC) today began its third review meeting amid mixed expectations of possible rate cut by the Reserve Bank of India. Expert opinions were divided if the RBI Governor-led panel will recommend cut in interest rate by 0.25 per cent to give fillip to growth or maintain status quo because of inflationary pressure from rising oil prices. Banks are flush with low cost deposits on account of demonetisation of high value currency notes of Rs 500 and 1,000, as a result of which their lending rates fell by up to 1 per cent last month. Although banks and industry have been pitching for cut in benchmark repo rate (short-term lending rate), the six-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel may adopt a cautious approach on February 8, especially in view of spike in crude oil prices and growing protectionist sentiment with Donald Trump taking charge as the US President. Oil (Brent) prices have risen to USD 56.8 per barrel, while President Trump has announced a host of protectionist measures which will impact the global economy, including India. According to PNB Managing Director Usha Ananthasubramanian there is an all-round expectation of 25 basis points cut in interest rate. However, the transmission has already taken place and the further rate cut would depend on how long this low cost deposits stays with the bank. "Most of the banks have already front-loaded rate cut and if need be there would be further rate cut," she said. In Patel's first policy review as RBI Governor in October, which was also the maiden review of the MPC, the repo rate was reduced by 0.25 per cent to 6.25 per cent. In the following policy meet in December, the repo rate was retained at 6.25 per cent. However, RBI has cut repo by 1.75 per cent since January 2015. "We are expecting 25 basis points cut in repo rate because macroeconomic factors like inflation, fiscal deficit are conducive for reduction. Given the growth-oriented budget, there is a widespread speculation that RBI would respond in the same spirit," Bank of Maharashtra Executive Director R K Gupta said. There are expectations of 25 basis point rate cut as there is excess liquidity in the system, UCO Bank MD CEO R K Takkar said. Bandhan Bank Chairman and Managing Director Chandra Shekhar Ghosh said that the RBI is unlikely to cut rate as banks are flush with funds. According to industry body Ficci, the RBI is likely to maintain status quo in the upcoming monetary policy meet and cut rates in the first half of fiscal year 2017-18. Rising for the fifth straight month, retail inflation or CPI quickened to 5.61 per cent in December, mainly on costlier vegetables and cereals, limiting the headroom for the RBI to lower rates. However, WPI or wholesale inflation fell in December but the rate of decline at 0.73 per cent was the slowest in last one year as food prices shot up, indicating return of inflationary pressures. (PTI)

RBI monetary policy review: Rising oil prices could dampen rate cut hopes

The 6-member monetary policy committee (MPC) of the RBI met for the second time since its inception to decide on the key monetary policy indicators of India. The decision taken by the MPC comes as a shock to many as one of the key rates i.e. the repo rate has been kept unchanged at 6.25%. 
&nbsp; 
Repo rate is the rate at which banks borrow from the RBI. 
&nbsp; 
Most of the experts, economists and bankers had predicted that the repo rate would be cut by 25 to 50 basis points at the back of slowdown of consumer price index (CPI) and a potential slowdown of the economy due to demonetisation.

CPI is a number that refelects the average price of a basket of consumer goods such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation.

Economics behind cut in the repo rate 
&nbsp; 
If the repo rate is cut, then the banks would be able to borrow at a lesser rate and then, they can pass this to the end-consumers by reducing the lending rates. Reduced lending rates would encourage people to take loans for businesses, education, buying a house and other personal needs, thus increasing the GDP of the country and subsequently the economic growth as well. 
&nbsp; 
However, there is another side to the story. If people are borrowing more, this implies that there are higher investments in the economy. High investments imply&nbsp;increased employment and thus,&nbsp;rise in the demand for goods and services, increasing the price level in the economy.

Whenever the MPC meets, they always have to face this dichotomy of chosing between higher economic growth versus high price levels. 
&nbsp; 
Current decision of MPC 
&nbsp; 
According to the statement of India&rsquo;s central bank, Reserve Bank of India&#39;s governor Urjit Patel, the reason behind keeping the repo-rate unchanged is to meet the&nbsp;inflation targets of 5% (with a plus-minus of 2%) for the last quarter&nbsp;of the&nbsp;financial year 2016-17. 
&nbsp; 
It seems that the inflation targeting took precedence over any other consideration while deciding the repo rate. Three main reasons that seem plausible for such hawkish approach are:

<ul>
	<li>Implementation of seventh pay commission recommendations can lead to rise in inflation &nbsp;</li>
	<li>Rise in domestic food prices</li>
	<li>Rise in crude oil prices after OPEC&rsquo;s decision to cut production</li>
</ul>

&nbsp; 
In the past couple of weeks, post demonetisation several experts and prominent organisations have cut down the GDP forecast for Indian economy. Even the RBI today cut the growth forecast for this fiscal from 7.6% to 7.1%. &nbsp;Thus, experts believed that RBI would cut the repo-rate to stimulate the economy and achieve the growth targets. 
&nbsp; 
However, it is believed that with the deposit of Rs 11.55 crore in banks post-demonetisation, there is excess liquidity in banks which would anyways encourage the banks to reduce their lending rates whether the repo rate cut happens or not. 
&nbsp; 
Some private banks like ICICI, Axis bank and Bank of Baroda have already reduced their lending rates in the past week before the meeting of MPC. 
&nbsp; 
No sweat over liquidity crunch 
&nbsp; 
Post-demonetisation, the Indian economy is reeling under liquidity crunch with thousands of people queuing outside ATMs and banks each day to withdraw money.&nbsp; 
&nbsp; 
During the press conference, RBI officials showed fair amount of confidence and said that the situation is under control as far as the liquidity is concerned. According to RBI officials, the remonetisation exercise is in full throttle with all the five printing presses of both RBI and government working to full capacity to print new notes. From November 10th to December 5th, RBI has printed currency worth Rs 4 lakh crore of higher denominations like the Rs 500 and Rs 2000 and during the same period, around 19.1 billion pieces of Rs 100, Rs 50 and Rs 20 denomination notes were printed. 
&nbsp; 
The RBI officials also mentioned that they may reduce the number of notes being printed as people are increasingly moving towards digital modes of payment. &nbsp; 
&nbsp; 
Clear distinction between monetary and fiscal policy 
&nbsp; 
Going by the textbook, the main monetary policy indicators are price level and money supply and the monetary policy lies in the domain of the central bank of a country, in this case, RBI. 
&nbsp; 
The fiscal policy is the domain of the government of a country and both the monetary and fiscal policy have to work in tandem for the future growth and economic stability of a country.&nbsp; 
&nbsp; 
Today, it can be observed that the RBI stuck to its side of the policy mandate, focusing completely on inflation targeting and trusting the government to work on the GDP front.

In the coming months, one should be on the lookout for the figures of the major economic indicators to get a sense of how the demonetisation policy has worked for India.

(WION)

 
&nbsp;

Most experts, economists and bankers had predicted the repo rate would be cut by 25 to 50 basis points

The 6-member monetary policy committee (MPC) of the RBI met for the second time since its inception to decide on the key monetary policy indicators of India. The decision taken by the MPC comes as a shock to many as one of the key rates i.e. the repo rate has been kept unchanged at 6.25%. Repo rate is the rate at which banks borrow from the RBI. Most of the experts, economists and bankers had predicted that the repo rate would be cut by 25 to 50 basis points at the back of slowdown of consumer price index (CPI) and a potential slowdown of the economy due to demonetisation. CPI is a number that refelects the average price of a basket of consumer goods such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation. Economics behind cut in the repo rate If the repo rate is cut, then the banks would be able to borrow at a lesser rate and then, they can pass this to the end-consumers by reducing the lending rates. Reduced lending rates would encourage people to take loans for businesses, education, buying a house and other personal needs, thus increasing the GDP of the country and subsequently the economic growth as well. However, there is another side to the story. If people are borrowing more, this implies that there are higher investments in the economy. High investments imply increased employment and thus, rise in the demand for goods and services, increasing the price level in the economy. Whenever the MPC meets, they always have to face this dichotomy of chosing between higher economic growth versus high price levels. Current decision of MPC According to the statement of India’s central bank, Reserve Bank of India's governor Urjit Patel, the reason behind keeping the repo-rate unchanged is to meet the inflation targets of 5% (with a plus-minus of 2%) for the last quarter of the financial year 2016-17. It seems that the inflation targeting took precedence over any other consideration while deciding the repo rate. Three main reasons that seem plausible for such hawkish approach are: Implementation of seventh pay commission recommendations can lead to rise in inflation Rise in domestic food prices Rise in crude oil prices after OPEC’s decision to cut production In the past couple of weeks, post demonetisation several experts and prominent organisations have cut down the GDP forecast for Indian economy. Even the RBI today cut the growth forecast for this fiscal from 7.6% to 7.1%. Thus, experts believed that RBI would cut the repo-rate to stimulate the economy and achieve the growth targets. However, it is believed that with the deposit of Rs 11.55 crore in banks post-demonetisation, there is excess liquidity in banks which would anyways encourage the banks to reduce their lending rates whether the repo rate cut happens or not. Some private banks like ICICI, Axis bank and Bank of Baroda have already reduced their lending rates in the past week before the meeting of MPC. No sweat over liquidity crunch Post-demonetisation, the Indian economy is reeling under liquidity crunch with thousands of people queuing outside ATMs and banks each day to withdraw money. During the press conference, RBI officials showed fair amount of confidence and said that the situation is under control as far as the liquidity is concerned. According to RBI officials, the remonetisation exercise is in full throttle with all the five printing presses of both RBI and government working to full capacity to print new notes. From November 10th to December 5th, RBI has printed currency worth Rs 4 lakh crore of higher denominations like the Rs 500 and Rs 2000 and during the same period, around 19.1 billion pieces of Rs 100, Rs 50 and Rs 20 denomination notes were printed. The RBI officials also mentioned that they may reduce the number of notes being printed as people are increasingly moving towards digital modes of payment. Clear distinction between monetary and fiscal policy Going by the textbook, the main monetary policy indicators are price level and money supply and the monetary policy lies in the domain of the central bank of a country, in this case, RBI. The fiscal policy is the domain of the government of a country and both the monetary and fiscal policy have to work in tandem for the future growth and economic stability of a country. Today, it can be observed that the RBI stuck to its side of the policy mandate, focusing completely on inflation targeting and trusting the government to work on the GDP front. In the coming months, one should be on the lookout for the figures of the major economic indicators to get a sense of how the demonetisation policy has worked for India. (WION)

Why the RBI kept interest rates unchanged despite demonetisation

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