RBI keeps interest rates unchanged: highlights of policy
New Delhi: Giving no respite to borrowers, the Reserve Bank for the second time in a row on Wednesday opted for a status quo in its key rates but shifted the stance of the monetary policy from ‘accommodative’ to ‘neutral’.
The RBI monetary policy committee today voted 6-0 to keep the repo rate at which it lends to the system at 6.25 percent, marking its third straight unanimous decision since being established in September.
Accordingly, the reverse repo rate at which it absorbs excess liquidity is also retained at 5.75 percent.
At 6.25 percent, the repo rate is already at a six-year low.
In the last policy review in December, RBI had decided to keep policy rate unchanged.
The monetary policy committee said it is “committed to bringing headline inflation closer to 4.0 percent on a durable basis and in a calibrated manner” and this requires further “significant decline in inflation expectations, especially since the services component of inflation that is sensitive to wage movements has been sticky.
The RBI also saw reduced need for additional rate cuts as banks have substantially slashed their lending rates this year after receiving a surge in deposits of old banknotes, and sought more time to gauge the impact of global headwinds on the rupee.
RBI also revised down its growth projection down to 6.9 percent for FY 2016-17 from 7.1 percent estimated earlier, but added that it will pick up sharply to 7.4 percent in FY 2017-18.
Following are the highlights of the sixth bi-monthly monetary policy announced by RBI:
* Policy repo rate unchanged at 6.25%.
* Economic growth for FY17 lowered to 6.9%; RBI pegs it at 7.4% in 2017-18.
* Growth is expected to recover sharply in 2017-18.
* Retail inflation in Q4 likely to be below 5%.
* Inflation projected in the range of 4-4.5% in the first half of 2017-18 and 4.5-5% in the second half.
* Upside risks to inflation – rise in crude oil prices, volatility in exchange rate, and fuller effect of the 7th Pay Panel.
* Global growth projected to pick up modestly in 2017.
* Global trade remains subdued due to increasing tendency towards protectionist policies.
* RBI changes policy stance from ‘accommodative’ to ‘neutral’.
* Monetary Policy Committee (MPC) shifts policy stance to neutral keeping in mind transitory effect of demonetisation.
* Surplus liquidity to fall with progressive remonetisation; abundant liquidity with banks may persist in early 2017-18.
* High frequency indicators point to subdued activity in services sector, automobile sales, domestic air cargo, railway freight traffic, and cement production.
* Steel consumption, port traffic, international air freight, foreign tourist arrivals weathered effect of demonetisation.
* Excluding food and fuel, inflation has been unyielding at 4.9% since September.
* Makes case for faster resolution of NPAs and hastening recapitalisation of banks for lower lending rates.
* The next meeting of the Monetary Policy Committee on April 5-6.
With Agency Inputs
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Source:Zee news
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