The RBI on Thursday maintained the status quo on its key short-term lending rate, at six percent, along with its 'neutral' stance, at the first bi-monthly monetary policy review of the new fiscal, in line with what was being widely expected. This is the fourth policy review in succession that the Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) has kept the repo, or short-term interest rate for commercial banks, unchanged, according to the RBI monetary policy statement, reported the IANS.
Experts weigh in with their views:
Rajnish Kumar, Chairman, State Bank of India
More than the RBI decision to keep rates unchanged, the tone of the policy is a pleasant surprise for the market. The decision to revise downwards the inflation projections and upwards the growth numbers is the best one could have asked for! Simultaneously, the several changes on the regulatory front, specifically the broadening of the IRS market and encouraging trading in STRIPS among others are some changes which are positive developments. The mooting of the idea of a Central Bank digital currency is a futuristic idea. Finally, the introduction of a mandatory loan requirement in working capital loans will provide the much-needed credit discipline.
Avnish Jain, Head – Fixed Income, Canara Robeco Mutual Fund
The first bi-monthly policy of RBI for FY2019 was as per expectations with RBI keeping repo rate unchanged at 6 percent whilst maintain the stance at 'neutral'. The policy language was softer than the previous policy with RBI acknowledging that inflation has been lower than RBI estimates and further reduced inflation expectation for 1HFY2019 to 4.7 percent-5.1 percent (from previous 5.1 percent-5.6 percent) and 4.4 percent in 2HFY2019. The MPC continued to highlight risks from higher oil prices, HRA increase by states, higher MSPs and possible fiscal slippage for Centre and states and noted that risks were tilted to the upside. On growth the MPC was positive and projected GDP for FY2019 at 7.4 percent. Overall the tone of policy was dovish, with five member voting for a pause and one member voting for a 25bps rate hike.
Indranil Pan, Chief Economist, IDFC Bank
No change was expected as also neutrality is maintained. The inflation outlook has been reduced a bit, but the confidence of it dipping below 4 percent seems absent. On the other side, they have also maintained the upside risks to inflation. Thus, given the current projected path in inflation, there is limited chance for RBI to react either ways. We maintain our expectations of RBI staying on hold for an expected period and through FY19.
Rana Kapoor, MD & CEO, YES Bank
Despite sharp correction in food prices in the last two months, RBI's status quo in the annual policy review was anticipated. Ongoing normalization of interest rates in US, higher global crude oil prices, and the looming threat of escalation in global trade war warranted a cautious approach. The neutral stance is also justified by government's proposed recalibration of Minimum Support Prices to 1.5x the cost of production for the upcoming kharif season. I believe the growth baton is now firmly in Government's hands as it is actively facilitating the revival of private investments. Additionally, with improvement in momentum of the asset resolution process, growth appetite should get ploughed back.
Anis Chakravarty, Lead Economist and Partner, Deloitte India
On anticipated lines, the Monetary Policy Committee (MPC) in its first bi-monthly policy statement of FY 2018-19 kept the policy rate steady on domestic and global cues. While presenting a positive view on the consumption front, the Reserve Bank of India (RBI) also suggested risks on the inflation front. The RBI has expectedly taken a hawkish stance and is likely to stick with its objective to keep inflation within the (4 +/- 2 percent range. As rightly pointed out by the policy statement, financial sector volatility and brewing trade wars are likely to
Good information
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit