RBI MPC Keeps Repo Rate Unchanged At 6

Posted By: Vanshika Pathak Posted On: Aug 10, 2023

The RBI's monetary policy committee (MPC) on Thursday unanimously decided to keep the key policy rate unchanged at 6.5 per cent, in line with expectations. This is the third time in a row that the central bank has paused the key interest rates.

The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.

Announcing the August 2023 bi-monthly monetary policy, RBI Governor Shaktikanta Das said the monetary policy stance is maintained at the ‘Withdrawal of Accommodation' with the MPC voting in favour of the interest rate decision in the ratio of 5:1.

The RBI has also kept its FY24 real GDP projection unchanged at 6.5 per cent.

On the inflation front, the RBI has revised upwards its inflation forecast to 5.4 per cent for the current financial year 2023-24, from 5.1 per cent projected earlier.

“The RBI is prepared to act if warranted, global growth will remain low, by historical standards for the next few years. A cumulative rate hike of 250 bps is working its way into the economy," the RBI governor said.

On inflation, Shaktikanta Das said, “Inflation is expected to surge in July and August due to vegetable prices, MPC remains resolute in aligning inflation to its 4 per cent target."

On the economy, the RBI governor said India's strong macroeconomic fundamentals have led to strong growth, India is contributing about 15 per cent to global growth.

India's retail inflation based on Consumer Price Index (CPI) rose to a three-month high of 4.81 per cent in June (latest available data), mainly on account of hardening prices of food. The inflation, however, remains within the RBI's comfort level of below 6 per cent. The inflation data for July will be released on August 14.

The RBI announces its monetary policy bi-monthly — every two months. Last monetary policy review took place in June 2023, two months ago. However, in extraordinary situations, the monetary policy review can also be done anytime — which is called an ‘off-cycle monetary policy review'. It previously took place in May 2022, when inflation was too high.

Source: News18
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Headline Inflation Faces Upside Pressures In Near Term On Costlier Vegetables

Posted By: Vishal Maurya Posted On: Aug 24, 2023

The spike in vegetable prices, led by tomatoes, will exert sizeable upside pressures on the near-term headline inflation trajectory, according to the minutes of the MPC meeting released by the RBI on Thursday. It said the possibility of a second round impact of food price shocks on the overall inflation prompted RBI MPC to opt for the status quo on the policy rate earlier this month.

The Reserve Bank of India (RBI) at its last bi-monthly monetary policy committee (MPC) meeting on August 10 decided to keep the benchmark interest rate (repo rate) unchanged at 6.5 per cent citing inflationary concerns.

All six members, including M D Patra, Shashanka Bhide, Ashima Goyal, Jayanth R Varma and Rajiv Ranjan, voted for status quo on the policy rate.

“Our task (of containing inflation) is still not over. Given the likely short-term nature of the vegetable price shocks, monetary policy can look through the first-round impact of fleeting shocks on headline inflation. At the same time, we need to be ready to pre-empt any second-round impact of food price shocks on the broader inflationary pressures and risks to anchoring of inflation expectations," opined Das, as per the minutes of the meeting released by the RBI on Thursday.

According to the RBI MPC minutes, going forward, the spike in vegetable prices, led by tomatoes, would exert sizeable upside pressures on the near-term headline inflation trajectory.

“This jump is, however, likely to correct with fresh market arrivals. There has been significant improvement in the progress of the monsoon and kharif sowing in July; however, the impact of the uneven rainfall distribution warrants careful monitoring," according to the minutes.

According to RBI Deputy Governor Patra, ensuring the sustained easing of core inflation was crucial to the MPC's objective of bringing inflation down to the target.

“This objective should not be undermined by supply shocks that show any signs of persisting and getting broader-based," he argued while voting for maintaining the status quo on the policy rate and for persevering with the withdrawal of monetary policy accommodation.

Source: News18
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