Mumbai, Feb 7: The
Reserve Bank of India (RBI) on Wednesday kept interest rates unchanged but
hinted that monetary conditions are likely to remain tight because of rising
risks to inflation.
It raised its March-end Consumer Price Index (CPI) inflation forecast to 5.1 per cent and projected an inflation range of 5.1-5.6 per cent in the first half of the next fiscal year.
The RBI has been in this mode for its previous two meetings also, after it last cut rates at its August 2017 meeting. The RBI’s Monetary policy committee had its sixth bimonthly meeting for this
fiscal yesterday and today. The decision of the 6-member committee was by a majority of 5 to 1.
Five members of the panel voted to keep rates unchanged, while Michael Patra, executive director at the central bank, wanted to raise rates by 25 basis points. One basis point is one-hundredth of a percentage point.
The inflation outlook is 'clouded by several uncertainties', noted the panel. It listed the staggered impact of housing rent allowance increases by the state government, rising prices of crude oil and other commodities owing to a pick-up in global growth, increase in minimum support prices (MSPs) for kharif crops, the budget’s hike in custom duties and the fiscal slippage as several factors.
There is 'need for vigilance around the evolving inflation scenario in the coming months', the panel said.
Wednesday’s decision comes at a time when inflation as measured by the CPI has been accelerating and has topped 4 percent, which is the central bank’s medium-term target, for two consecutive months.
Latest data shows CPI inflation accelerated to 5.21 percent in December, the fastest pace in 17 months, from 4.88 percent. The rise was due to the statistical impact of a low base.
On growth, the RBI has cut the growth projections for the current fiscal to 6.6 percent from 6.7 percent earlier. For the next financial year, it has projected gross value added (GVA) growth of 7.2 percent.
A stabilising goods and services tax (GST) regime, improving credit offtake, rising capital goods production and recapitalisation of banks augur well for growth, the panel said.
The Monetary policy committee’s (MPC) decision was in line with market consensus that there would be no change in rates, although the tone of the statement was expected to be hawkish.
The MPC expects GVA to be at 6.6 per cent, a tad bit lower than what
was projected earlier. Beyond the current year, the growth outlook will be influenced by several factors.
First, GST implementation is stabilising, which augurs well for economic activity. Second, there are early signs of revival in investment activity as reflected in improving credit offtake, large resource mobilisation from the primary capital market, and improving capital goods production and imports. Third, the process of
recapitalisation of public sector banks has got underway. Large distressed borrowers are being referenced for resolution under the Insolvency and Bankruptcy Code (IBC). This should improve credit flows further and create demand for fresh investment. Fourth, although export growth is expected to improve further on account of improving global demand, elevated commodity prices, especially of oil, may act as a drag on aggregate demand. UNI
It raised its March-end Consumer Price Index (CPI) inflation forecast to 5.1 per cent and projected an inflation range of 5.1-5.6 per cent in the first half of the next fiscal year.
The RBI has been in this mode for its previous two meetings also, after it last cut rates at its August 2017 meeting. The RBI’s Monetary policy committee had its sixth bimonthly meeting for this
fiscal yesterday and today. The decision of the 6-member committee was by a majority of 5 to 1.
Five members of the panel voted to keep rates unchanged, while Michael Patra, executive director at the central bank, wanted to raise rates by 25 basis points. One basis point is one-hundredth of a percentage point.
The inflation outlook is 'clouded by several uncertainties', noted the panel. It listed the staggered impact of housing rent allowance increases by the state government, rising prices of crude oil and other commodities owing to a pick-up in global growth, increase in minimum support prices (MSPs) for kharif crops, the budget’s hike in custom duties and the fiscal slippage as several factors.
There is 'need for vigilance around the evolving inflation scenario in the coming months', the panel said.
Wednesday’s decision comes at a time when inflation as measured by the CPI has been accelerating and has topped 4 percent, which is the central bank’s medium-term target, for two consecutive months.
Latest data shows CPI inflation accelerated to 5.21 percent in December, the fastest pace in 17 months, from 4.88 percent. The rise was due to the statistical impact of a low base.
On growth, the RBI has cut the growth projections for the current fiscal to 6.6 percent from 6.7 percent earlier. For the next financial year, it has projected gross value added (GVA) growth of 7.2 percent.
A stabilising goods and services tax (GST) regime, improving credit offtake, rising capital goods production and recapitalisation of banks augur well for growth, the panel said.
The Monetary policy committee’s (MPC) decision was in line with market consensus that there would be no change in rates, although the tone of the statement was expected to be hawkish.
The MPC expects GVA to be at 6.6 per cent, a tad bit lower than what
was projected earlier. Beyond the current year, the growth outlook will be influenced by several factors.
First, GST implementation is stabilising, which augurs well for economic activity. Second, there are early signs of revival in investment activity as reflected in improving credit offtake, large resource mobilisation from the primary capital market, and improving capital goods production and imports. Third, the process of
recapitalisation of public sector banks has got underway. Large distressed borrowers are being referenced for resolution under the Insolvency and Bankruptcy Code (IBC). This should improve credit flows further and create demand for fresh investment. Fourth, although export growth is expected to improve further on account of improving global demand, elevated commodity prices, especially of oil, may act as a drag on aggregate demand. UNI
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