RBI keeps repo rate unchanged

RBI said that global growth is projected to pick up modestly in 2017, after slowing down in the year gone by

GN Bureau | February 8, 2017


#Reserve Bank of India   #RBI   #Monetary Policy Committee   #MPC   #Banking  


The Reserve Bank of India (RBI) on Thursday kept the repo rate, which is the short-term lending rate, unchanged at 6.25 percent.

Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

The Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent. Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 percent by Q4 of 2016-17 and the medium-term target of 4 percent within a band of +/- 2 per cent, while supporting growth,” said a statement.

RBI said that global growth is projected to pick up modestly in 2017, after slowing down in the year gone by. Advanced economies (AEs) are expected to build upon the slow gathering of momentum that started in the second half of 2016, led by the US and Japan. However, uncertainty surrounds the direction of US macroeconomic policies with potential global spillovers. Growth prospects for emerging market economies (EMEs) are also expected to improve moderately, with recessionary conditions ebbing in Russia and Brazil, and China stabilising on policy stimulus. Inflation is edging up on the back of rising energy prices and a mild firming up of demand. However, global trade remains subdued due to an increasing tendency towards protectionist policies and heightened political tensions. Furthermore, financial conditions are likely to tighten as central banks in AEs normalise exceptional accommodation in monetary policy.

It noted that international financial markets turned volatile from mid-January on concerns regarding the ‘Brexit’ roadmap and materialisation of expectations about economic policies of the new US administration. Within the rising profile of international commodity prices, crude oil prices firmed up with the OPEC’s agreement to curtail production. Prices of base metals have also increased on expectations of fiscal stimulus in the US, strong infrastructure spending in China, and supply reductions. Geopolitical concerns have also hardened commodity prices. More recently, the appetite for risk has returned in AEs, buoying equity markets and hardening bond yields as a response to the growing likelihood of further increases in the Federal Funds rate during the year. Coupled with expectations of fiscal expansion in the US, this has propelled the US dollar to a multi-year high.

The Central Statistics Office (CSO) released its advance estimates for 2016-17 on January 6, placing India’s real Gross Value Added (GVA) growth at 7.0 per cent for the year, down from 7.8 percent (first revised estimates released on January 31) a year ago. Agriculture and allied activities posted a strong pick-up, benefiting from the normal south-west monsoon, robust expansion in rabi acreage (higher by 5.7 per cent over the preceding year) and favourable base effects as well as the continuing resilience of allied activities. In contrast, the industrial sector experienced a sharp deceleration, mainly due to a slowdown in manufacturing and in mining and quarrying. Service sector activity also lost pace, concentrated in trade, hotels, transport and communication services, and construction, cushioned to some extent by public administration and defence.

Read: Sixth Bi-monthly Monetary Policy Statement, 2016-17

 

Comments

 

Other News

SAIL launches smart trash bins to develop smart garbage stations

SAIL has rolled out stainless steel smart garbage bins, which will display signals to the collection vehicle about the ‘fill-up’ position.   A smart garbage station will be set up at Bhikaji Cama Place, which is being developed by SDMC (South Delhi Municipal Corporati

Civil enclave at Hindon airport unveiled by PM Modi

Prime minister Narendra Modi recently inaugurated a civil enclave at Hindon airport in Ghaziabad. The development of new civil enclave at Hindon airport is aimed at reducing the burden of Delhi’s IGI Airport and will also serve the passengers from Delhi NCR and Uttar Pradesh. Hindon

Rethinking healthcare

The new world is aggressively batting for individual rights and self-determination. As the society is evolving for the better, we see a more assertive Indian coming to the fore. An Indian who has higher expectations and an Indian who is cognizant of his/her rights. Our constitution guarantees us several fr

Why not have a reconciliation panel?

Jenine di Giovanni, a reporter who was a first-hand witness to the destruction in Bosnia, Chechnya and other places, wrote: “In the aftermath of any war or genocide, healing and reconciliation are ultimate aspirations.” After some years of the end of the apartheid era in South Africa, the Truth

An engineering disaster

After passing the 12th board exams in 2014, Vikas Kumar, of Madhepura in Bihar, took a year’s break to prepare for the engineering entrance exam. The hard work paid off and he managed to score high enough to qualify for admission to one of the prestigious National Institutes of Technology (NITs), whe

Why AAP-Congress alliance could be a threat for BJP

The Congress party has unanimously supported Sheila Dikhshit`s decision to reject an alliance with the Aam Aadmi Party (AAP) in Delhi. With the Congress shutting the prospect of alliance, the national convener and Delhi chief minister Arvind Kejriwal has slammed the party saying that when the whole nation



Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter