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Monetary policy LIVE: RBI keeps repo rate unchanged at 6%

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Experts do not expect the central bank to loosen its monetary policy stance, specially amid inflation concerns and given that counterparts across the globe are maintaining a tight stance

BS Web Team  |  New Delhi  Last Updated at December 6, 2017 14:46 IST

Reserve Bank of India

The (MPC) of the (RBI), led by Governor Urjit Patel, will on Wednesday disclose the outcome of its two-day meeting to review the central bank’s policy stance. Will the reduce the key repo rate, or the rate at which it lends money to commercial banks? Or will it keep its cautious stance and maintain the status quo to keep a tab on
 
The market seems to be of the view that the six-member will not change the policy Besides rising inflation, the issues of hardening bond yields and tightening liquidity have reduced the scope for loosen its stance.
 
Ten economists and bond dealers polled by Business Standard said the policy was expected to stay put at six per cent. Even as the policy stance would likely remain ‘neutral’, many economists said this could be the end of a rate-easing cycle.
 
It is unlikely that the Reserve Bank would lower its rates also given the fact that central banks across the globe are tightening their monetary stance. The interest rate spread will need to be maintained for foreign investors to put their money in Indian stocks and bonds.
 
In the October review of its monetary policy, the MPC had kept the benchmark interest rate unchanged and lowered its growth forecast for the country’s economy in 2017-18 to 6.7 per cent.
 
The had last tinkered with the policy rate in August, when it brought the down by 25 basis points to a six-year low of six per cent.

2:46 PM RBI: Going forward, the inflation path will be influenced by several factors. First, moderation in inflation excluding food and fuel observed in Q1 of 2017-18 has, by and large, reversed. There is a risk that this upward trajectory may continue in the near-term. Second, the impact of HRA by the Central Government is expected to peak in December. The staggered impact of HRA increases by various state governments may push up housing inflation further in 2018, with attendant second order effects. Third, the recent rise in international crude oil prices may sustain, especially on account of the OPEC’s decision to maintain production cuts through next year. In such a scenario, any adverse supply shock due to geo-political developments could push up prices even further.

2:45 PM RBI:  The headline inflation outcomes have evolved broadly in line with projections

2:44 PM The October bi-monthly statement projected inflation to rise and range between 4.2-4.6 per cent in the second half of this year, including the impact of increase in house rent allowance (HRA) by the Centre.

2:44 PM CPI inflation excluding food and fuel, which increased from July to September, remained steady in October

2:43 PM The unemployment rate fell to 4.1 per cent in October, the lowest in the last 17 years.

2:42 PM Since the last meeting of the MPC in October 2017, global economic activity has been gaining momentum through the final quarter of the year, driven mainly by advanced economies (AEs).

2:41 PM RBI’s decision is consistent with a neutral stance 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. The main considerations underlying the decision are set out in the statement below.

2:41 PM Banks’ foreign branches can refinance AAA cos’ FX loans

2:40 PM RBI: Ease of biz rankings to help sustain FDI flows

2:40 PM RBI: Ease of biz rankings to help sustain FDI flows

2:40 PM Monetary policy committee sees capital market funds get deployed for new projects

2:39 PM Monetary policy committee feels some recent developments favourable to growth

2:39 PM MSF, Bank Rate remains unchanged at 6.25%

2:39 PM MPC committed to keep CPI close to 4 per cent on durable basis

2:38 PM

MPC member R Dholakia favoured 25 bps cut in Repo Rate

2:38 PM FY18 Real GVA growth aim stays at 6.7% with risks evenly balanced

2:38 PM CPI seen 4.3-4.7% Oct-Mar including rent allowance hike

2:38 PM Monetary Policy Committee votes 5:1 to maintain status quo on Repo rate

2:37 PM Q3, Q4 CPI inflation likely to be in the range of 4.3-4.7 per cent

2:36 PM RBI reiterated that it is maintaining a “neutral” stance in monetary policy.

2:34 PM RBI increases inflation forecast

2:34 PM Reverse Repo at 5.75%

2:32 PM RBI maintains status quo 

2:31 PM Urjit Patel keeps repo rate unchanged at 6%

2:29 PM RBI policy decision in few minutes 

2:28 PM With inflation trajectory likely to remain upward in the coming months, many analysts see a prolonged pause from RBI. 

2:27 PM RBI is also expected to retain its “neutral” stance, while cautioning about inflation, which accelerated to a seven-month high in October.

2:22 PM RBI’s stance on liquidity would also be closely watched. Excess liquidity with banks is down to around Rs. 70,000 crore from a peak of more than Rs. 5 lakh crore in March, according to the Bloomberg Economics India Banking Liquidity Index. That has led State Bank of India and the Punjab National Bank – large state-run lenders – to raise rates on bulk deposits.

2:20 PM With concerns over government’s fiscal deficit and rising global crude oil prices, the RBI is likely to reiterate a “neutral” stance, say analysts.

2:14 PM Analysts expect the RBI to reiterate concern about inflation, as the annual rate of consumer inflation increased to 3.58 per cent in October, not far from the central bank’s 4 per cent target.

2:10 PM “In the wake of significant spurt in the valuation of many VCs and rapid growth in Initial Coin Offerings (ICOs), RBI reiterates the concerns,” the central bank said in a statement.

2:09 PM Reserve Bank of India (RBI) has cautioned the “users, holders and traders” of Bitcoins about the security related risks associated in dealing with such virtual currencies (VCs).

1:53 PM In August, the RBI made its only cut in 2017, of 25 basis points, and in October, it held.

1:51 PM

1:50 PM Nifty PSU Bank index slips over 1% ahead of RBI policy outcome

12:37 PM ALSO READ: Rate cut or status quo? RBI policy meet begins; decision on rate today

12:35 PM Even as experts rule out a rate cut, some say the RBI might soften its tone somewhat and sound more accommodative

12:29 PM Since the economic growth, despite its apparent recovery, is still behind target, there have been calls from some government officials for the RBI to trim the repo rate again.

12:28 PM ALSO READ: Q2 GDP growth raises some hope, but meeting FY18 forecast still not easy

12:27 PM For the country to be able to come anywhere close to the full financial year target, the manufacturing and services sectors of the economy will need to do exceptionally well, wrote A K Bhattacharya in a recent Business Standard piece

12:24 PM Despite a recovery when compared with the previous quarters, the Q2 GDP numbers are still well below the 8% target for the 2017-18 financial year

12:23 PM Radhika Rao, an economist with DBS in Singapore, had said: “The recovery is a source of comfort for RBI, as it lowers pressure on the central bank to take a growth-supportive stance.”

12:22 PM Official data released last week showed a recovery in India’s GDP growth during the July-September quarter to 6.3 per cent on a year-on-year basis, compared with 5.7 per cent during the previous quarter

12:20 PM “It’s going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation,” Reuters quoted Union Bank MD and CEO Rajkiran Rai G as saying in a recent report

12:19 PM However, not many experts hope the RBI would effect a rate cut in its first meeting of 2018 calendar year, either

12:18 PM The central bank is expected to reiterate a “neutral” stance, which will give it the flexibility to cut rates in February

12:14 PM Similarly, all 10 economists and bond dealers polled by Business Standard said the policy repo rate was expected to stay put at six per cent

12:13 PM 52 of the 54 analysts polled by Reuters said the repo rate would be left at 6%, which is already the lowest level since November 2010

12:12 PM Another reason for RBI if it considers a rate cut would be core inflation (excluding food and energy prices), which has remained stubbornly high — at around 4.5% in October

11:47 AM Also, stronger GDP growth in the secon quarter of this financial year (July-September) has reduced the need for a monetary stimulus

11:46 AM

The rate of retail inflation accelerated to a seven-month high of 3.58 per cent in October

11:42 AM It is widely believed that the RBI would not effect any rate cut amid rising inflation levels 

11:42 AM While the government would want the RBI to loosen its monetary policy stance and effect a repo rate cut, experts see the central bank maintaining the status quo today

11:41 AM The Reserve Bank of India will today announce the outcome of its monetary policy committee’s two-day bimonthly policy meet  

First Published: Wed, December 06 2017. 14:43 IST

Monetary policy LIVE: RBI keeps repo rate unchanged at 6%

Experts do not expect the central bank to loosen its monetary policy stance, specially amid inflation concerns and given that counterparts across the globe are maintaining a tight stance

Experts do not expect the central bank to loosen its monetary policy stance, specially amid inflation concerns and given that counterparts across the globe are maintaining a tight stance The (MPC) of the (RBI), led by Governor Urjit Patel, will on Wednesday disclose the outcome of its two-day meeting to review the central bank’s policy stance. Will the reduce the key repo rate, or the rate at which it lends money to commercial banks? Or will it keep its cautious stance and maintain the status quo to keep a tab on
 
The market seems to be of the view that the six-member will not change the policy Besides rising inflation, the issues of hardening bond yields and tightening liquidity have reduced the scope for loosen its stance.
 
Ten economists and bond dealers polled by Business Standard said the policy was expected to stay put at six per cent. Even as the policy stance would likely remain ‘neutral’, many economists said this could be the end of a rate-easing cycle.
 
It is unlikely that the Reserve Bank would lower its rates also given the fact that central banks across the globe are tightening their monetary stance. The interest rate spread will need to be maintained for foreign investors to put their money in Indian stocks and bonds.
 
In the October review of its monetary policy, the MPC had kept the benchmark interest rate unchanged and lowered its growth forecast for the country’s economy in 2017-18 to 6.7 per cent.
 
The had last tinkered with the policy rate in August, when it brought the down by 25 basis points to a six-year low of six per cent.
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BS Web Team

Business Standard

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