RBI announces to undertake monetary policy reviews on two-monthly cycle
Highlights of Monetary Policy Review:* Repo rate hiked 25 bps from 7.75% to 8.0%
* CRR unchanged at 4.0%
* MSF rate and the Bank Rate hiked by 25 bps each to 9.0%.
* Global recovery is gaining traction, but it is still uneven and subdued in the Euro area and Japan and a slowdown in China seems to be underway.
* Domestically, some loss of momentum of growth is likely in Q3FY14
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* Fiscal tightening through Q3 and Q4 is likely to exacerbate the weakness in aggregate demand.
* Lead indicators of services suggest a subdued outlook, barring some pick-up in transport and communication activity.
Policy Stance and Rationale
* CPI inflation excluding food and fuel has remained flat
* WPI inflation excluding food and fuel has risen.
* Dr. Urjit Patel Committee has indicated a glide path for disinflation that sets an objective of below 8% CPI inflation by January 2015 and below 6% CPI inflation by January 2016.
* There are upside risks to the forecast of 8%.
* GDP growth can be expected to firm up from a little below 5% in 2013-14 to a range of 5 to 6% in 2014-15, with risks balanced around the central estimate of 5.5%.
* On recommendations of Dr. Urjit Patel Committee, monetary policy reviews will ordinarily be undertaken in a two-monthly cycle, consistent with the availability of key macroeconomic and financial data.
* Next policy review is scheduled on 01 April 2014.
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