RBI says will await transmission of policy rates to lending rates
The Reserve Bank of India (RBI) released first bi-monthly monetary policy review for 2015-16. The key highlights of the policy are as follows:MONETARY AND LIQUIDITY MEASURES
* Repo rate unchanged at 7.5%;
* CRR unchanged at 4.0%
ASSESSMENT
Global
More From This Section
* a moderate and uneven global recovery is emerging
* Global markets been boosted by expectations of normalization of US monetary policy being pushed back into late 2015
Domestic
* Economic activity is likely to have strengthened in Q4.
* Industrial sector appears to be regaining momentum
* Consumer durables contraction reflect weakness in consumption demand as well as higher imports.
* Mixed signals are coming from the service sector.
* Export performance has been progressively weakening
* Exports of services helping to hold down the current account deficit (CAD)
POLICY STANCE AND RATIONALE
* CPI inflation is projected at its current levels in Q1 of 2015-16, moderating to 4% by August 2015 but firming up to reach 5.8% by the end March 2016.
* Upside risks to the central projection emanating from
- Possible intensification of el ni conditions leading to a less than normal monsoon
- Geo-political developments leading to hardening of global commodity prices
- Spillover from external developments through exchange rate and asset price channels.
* Downsides originating from global deflationary/disinflationary tendencies, the still soft outlook on global commodity prices; and slack in the domestic economy.
* Transmission of policy rates to lending rates has not taken place
GROWTH
* Outlook for growth is improving gradually.
* Growth for 2015-16 is projected at 7.8%, up from 7.5% in 2014-15
* But with a downward bias to reflect the still subdued indicators of economic activity
STANCE
* Going forward, the accommodative stance of monetary policy will be maintained
* But monetary policy actions will be conditioned by incoming data.
* RBI will await the transmission by banks of its front-loaded rate reductions in January and February into their lending rates.
* Food prices will also be monitored
* Stays vigilant to any threats to the disinflation that is underway.
* RBI will watch for signs of normalization of the US monetary policy
Powered by Capital Market - Live News