Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
Last updated 6 hours, 9 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
RBI policy stance needed rethink: Official
December 07, 2018
 Print    Send to Friend

NEW DELHI: Economic Affairs Secretary Subhash Chandra Garg said the ‘calibrated tightening’ stance of RBI’s Monetary Policy Committee (MPC) probably needed a rethink even as he welcomed the decision on policy rate.

“The government welcomes the assessment of the MPC. The government notes its decision to maintain the policy rate. The policy stance probably required calibration,” Garg said in a statement issued by the Ministry of Finance.

With inflation under control and forecast of even lower inflation in the second half of the current fiscal, there was a case for change in stance from ‘calibrated tightening’ to ‘neutral’ even as the market believed the rates would remain unchanged.

However, the MPC while keeping the repo rate intact at 6.5 per cent, also retained the stance as it saw higher implied volatility in the sharp decline in inflation in short term and wanted to see whether fall in food and oil prices are durable in medium term.

Garg also said that the RBI’s decision to reduce Statutory Liquidity Ratio (SLR) from existing 19.5 per cent to 18 per cent in six quarterly instalments beginning January 2019 “will have some implications for the government securities”.


Upside risks to inflation led the RBI on Wednesday to keep its repo, or short-term lending rate for commercial banks, unchanged at 6.5 per cent for the second time in succession, even as India Inc expressed disappointment over the decision.

Consequently, the Reserve Bank of India’s (RBI) reverse repo rate has been maintained at 6.25 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.75 per cent.

RBI Governor Urjit Patel and Deputy Governor Viral Acharya addressed a news conference after a monetary policy review in Mumbai on Wednesday.

Although the industry had expected RBI to maintain status quo in the lending rate during the fifth monetary policy review, there were hopes of a change in stance due to the latest lower inflation readings.

However, the RBI’s monetary policy committee (MPC) did not change the central bank’s stance of “calibrated tightening” in the penultimate monetary policy review of the current fiscal. The stance was adopted in the last policy review conducted in October.

The decision on keeping the policy rate unchanged was taken unanimously by the six-member MPC headed by Urjit Patel. However, government nominee in the MPC, Ravindra Dholakia, voted to change the stance back to neutral.

According to RBI, even as inflation projections have been revised downwards, several uncertainties still cloud the inflation outlook.

“The MPC noted that the benign outlook for headline inflation is driven mainly by the unexpected softening of food inflation and collapse in oil prices in a relatively short period of time,” Patel said at the post-meeting press conference.

“Excluding food items, inflation has remained sticky and elevated, and the output gap remains virtually closed.”

Accordingly, the central bank believes that there are challenges like a sudden spike in prices of perishable food items, risks from revision in minimum support prices (MSPs) and rise in crude oil price to inflation and inflationary outlook.

Indo-Asian News Service

Add this page to your favorite Social Bookmarking websites
Post a comment
Related Stories
RBI governor to meet associations of industry and commerce today
Mumbai: Continuing his series of consultations with various stakeholders of the economy, Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said he would m..
India’s main equity indices surge 1.79%
MUMBAI: Buying at lower levels and hopes of an easing monitory policy with the appointment of Shaktikanta Das as the new RBI Governor pushed the key equity indices 1.8 pe..
RBI can sell $25b more to arrest rupee fall: SBI
Mumbai: The Reserve Bank of India (RBI) should intervene in both spot and forward markets to arrest Indian rupee’s depreciation, suggested a State Bank of India (SBI) Eco..
RBI rate hike subdues equity indices
MUMBAI: The domestic equity indices retreated from their record levels on Wednesday to settle in the red after the Reserve Bank of India (RBI) increased its key lending r..
RBI enhances housing loan limits under PSL
MUMBAI: The Reserve Bank of India (RBI) enhanced the housing loan limits under priority sector lending (PSL) to Rs35 lakh in metropolitan centres under the affordable hou..
Advertise | Copyright