RBI Monetary Policy Highlights: The Monetary Policy Committee (MPC) on December 8 retained the key lending rate, repo, at 4 percent, and maintained its stance as "accommodative". Repo is the rate at which the Reserve Bank of India lends short-term funds to banks. This is the ninth consecutive policy meeting where the rate setting panel has maintained the key lending rate. The MPC has also maintained the reverse repo rate at 3.35 percent and the MSF rate at 4.25 percent. The announcement came in the context of fresh threats from the Omicron variant. So far, India has reported over two dozen Omicron cases. This has forced several states to impose fresh travel restrictions. There is a fear that the Omicron surge will lead to a third wave of Covid-19 in the country.
The RBI has retained its GDP growth projection at 9.5 percent for FY22, but revised Q3FY22 growth estimate to 6.6 percent from 6.8 percent earlier. Das said that the emergence of Omicron has given rise to fears of further restrictions on travel and economic activity, which has led to "considerable uncertainty on growth dynamics" for the coming months. The governor said that the reduction in VAT of fuel will have direct impact on inflation, but price pressures may persist in the near term. However, the RBI expects headline inflation to peak in Q4FY22, after which it is likely to soften.
Here are the highlights of the RBI MPC announcement:
- RBI keeps repo rate unchanged at 4 percent
- Reverse repo rate also remains unchanged at 3.35 percent.
- The MPC voted unanimously 5:1 to maintain 'accomodative' stance.
- The marginal standing facility (MSF) has also been left unchanged at 4.25 percent.
- Projection for real GDP growth is maintained at 9.5 percent. The central bank has however revised its Q3FY22 GDP growth to 6.6 percent from earlier 6.8 percent, and cut Q4FY22 GDP to 6 percent from 6.1 percent. Meanwhile, the RBI has cut Q4FY22 GDP to 6 percent from 6.1 percent earlier; and FY22 CPI inflation target has been maintained at 5.3 percent.
- FY22 CPI inflation target maintained at 5.3 percent. The October-December CPI inflation target has been revised to 5.1 percent from 4.5 percent earlier; while January-March CPI inflation forecast has been revised to 5.7 percent compared to 5.8 percent earlier.
- The Q1FY23 GDP growth forecast has been retained at 17.2 percent; Q2FY23 GDP growth seen at 7.8 percent; Q1FY23 CPI forecast revised to 5 percent from 5.2 percent; and Q2FY23 CPI forecase seen at 5 percent.
- From January 2022, liquidity adjustment will be mainly via the Variable Reverse Repo Auction. Headline CPI inflation is expected to peak in Q4 and soften thereafter.
- Proposed return to normal dispensation under MSF Window, as the “RBI remains committed to our ‘accommodative’ stance to broaden growth impulses”.
- Financial conditions turning increasingly volatile and there is considerable uncertainty over growth-inflation dynamics, thus RBI will continue to rebalance liquidity conditions in a non-disruptive manner.
- The aim is to re-establish 14-day Variable Reverse Repo Rate (VRRR) as the main liquidity operation. The RBI is to absorb Rs 6.5 lakh crore in VRRR auction on December 17 and absorb Rs 7.5 lakh crore in VRRR auction on December 31.
- RBI retains flexibility to fine-tune liquidity operations. It will allow banks to make one-time pre-payment with respect to TLTROs announced.
- The RBI will release a discussion paper on charges on digital payments.
- It is to also launch Unified Payments Interface (UPI)-based Feature Phone Products.
- Further, UPI caps for gilts, retail and IPOs are to be enhanced to Rs 5 lakh
MPC notes that crude oil prices have eased, that consumption demand has been improving and rural demand is exhibiting resilience. Recovery in the Indian economy is gathering traction. Government consumption has picked up from October 2021.
"We hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy – COVID-19. The domestic economic outlook is somewhat clouded by Omicron variant," said Governor Das.
Das said the recent tax cuts on petrol and diesel should help in crowding-in private investment. There has been significant deleveraging of corporate balance sheet. Government's focus on Capex should help in crowding-in private investment
Globally, economic activity levels are reaching pre-pandemic times, he believes.
RBI Monetary Policy Update | Reaction: Lakshmi Iyer, CIO – Debt & Head – Products, Kotak Mahindra Asset Management Company
In what seemed like a close call, the RBI MPC chose to maintain status quo on key benchmark rates. No material changes to growth and inflation forecasts too. This suggests RBIs caution on the recent developments on the pandemic front. While 14-day VRRR amount has been increased in a graded manner, there seems to be no sense of urgency on RBI’s part to initiate any abrupt liquidity drain out measures. Bond markets should draw comfort from this decision and continue to trade range bound. Global cues to dominate the rate moves going forward.
RBI Monetary Policy Update | Reaction: Dhaval Ajmera, Director of Ajmera Realty & Infra India
RBI maintaining status quo on rates augurs well for brining equilibrium in the demand-supply economics of the real estate industry. With low loan interest rate regime, the home sales velocity witnessed across key Indian cities will continue on upward trajectory. The stock markets are expected to remain buoyant and realty index will continue to advance with positive bias in the short to medium term.
The revision of GDP and inflation targets are seen to be milder than expectation. The upcoming discussion paper to make the digital payments more affordable is a positive take-away from Governor’s speech. The announcements related to digital payments can offer disruption and bring dynamism in financial inclusivity expedition in the country.
RBI to work of PMC Bank resolution 'very quickly', says Governor Shaktikanta Das
The Reserve Bank of India will act “very quickly” on the Punjab and Maharashtra Cooperative Bank resolution once it receives the feedback on the draft amalgamation scheme with Unity Small Finance Bank, governor Shaktikanta Das said on December 8.
The RBI has given the stakeholders time till December 10 for comments on the amalgamation proposal. After examining the feedback, the draft would be sent to the government for the final approval, Das told media as he shared the outcome of the monetary policy committee meeting.
The RBI has on November 22 placed in public domain a draft scheme for the amalgamation of Punjab and Maharashtra Cooperative (PMC) Bank and Unity Small Finance Bank (USFB). Read full here
RBI Monetary Policy Update | Reaction: Shishir Baijal, Chairman & Managing Director, Knight Frank India
We welcome the decision of the MPC on maintaining status quo on the key policy rates as well as continuing its accommodative stance that has so far helped the Indian economy to beat the gloomy shadows of COVID – 19.
Most high frequency indicators have bounced back to pre-COVID levels; however, some slack in the economy remains. The low interest regime and adequate liquidity into the system is critical to further strengthen the domestic market.
RBI Monetary Policy Update | Reaction: Vikash Khandelwal, CEO, Eqaro Guarantees
The RBI has maintained continuity in its accommodative stance by keeping the key rates unchanged. While India has emerged as the fastest-growing major economy the RBI’s decision today will further support growth and hasten the economy’s return to normalcy. The central bank has been pushing for a stable policy regime as the economy recovers in aftermath of the pandemic.
A phased unwinding of liquidity, stable energy prices, and the manner in which the government navigates through the pandemic will be key to growth in FY22 & FY23.
RBI Monetary Policy: What market experts and economists are saying
The MPC, in line with market estimates, today kept the repo rate unchanged at 4 percent and maintained its accommodative stance until there is sustained economic recovery. After the announcement by Governor Shaktikanta Das, markets remained upbeat and hit the day’s high, led by financials, information technology and real estate sectors. Let’s check out what market experts and economists feel about the outcome of the Monetary Policy meeting. Read full here
RBI Monetary Policy Update | Reaction: Rahul Bajoria, Chief India Economist, Barclays
The RBI today paused the normalisation process that began in October and indicated it will maintain a growth-centric normalisation of policy.
However, the resilience of economic activity will keep the RBI on track to normalise its policy conditions in 2022.
RBI Monetary Policy Update | Reaction: Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
The policy was as expected and cautious on the uncertainty due to the Omicron variant. Also, the RBI continued with the liquidity normalisation on expected lines without any explicit signal of liquidity withdrawal.
The inflation estimates are also lower than what the markets are expecting. Broadly, the policy is more dovish-than-expected possibly given the uncertainty from the new Covid variant.
If the Omicron variant is benign, we expect reverse repo hike of around 20 bps possible in the February policy and tad more aggressive liquidity withdrawal.
RBI Monetary Policy Update | Market at 1 PM
Benchmark indices extended the gains and trading near the day's high with Sensex rising above 800 points.
The Sensex was up 865.96 points or 1.50% at 58499.61, and the Nifty was up 247.80 points or 1.44% at 17424.50. About 2228 shares have advanced, 774 shares declined, and 103 shares are unchanged. Read LIVE blog here
RBI Monetary Policy Update | Reaction: Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank
The MPC expectedly maintained status quo on the policy rates and stance. The rhetoric too has remained focused on maintaining durable growth as long as inflation remains well in check.
We continue to expect RBI to fine tune the surplus liquidity to manage rates and consequently provide guidance on the operating target rate shifting closer to the Repo rate. We retain our base case of reverse repo rate hike in February.
RBI Monetary Policy Update | Reaction: VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services
Conceding that "there is considerable uncertainty in the growth-inflation dynamics" the MPC has again decided in favour of growth by contnuing with accommodative monetary stance and status quo in rates.
More importantly, the guidance also is dovish with no indications of a rate hikes in the immediate future. The CPI inflation projection for Q3 and Q4 of FY22 at 5.1% and 5.7% respectively is an indication of RBI's belief that higher food inflation is temporary, since it is caused by crop damages during unseasonal rains.
Also, the central bank believes that lower crude prices and reduced petrol and diesel prices will "mitigate the cost push build up". In brief, a pro-growth policy and very positive from the market perspective.
RBI Monetary Policy: Normal dispensation under MSF likely from January 1
The Reserve Bank of India (RBI) has proposed to return to the normal dispensation under the Marginal Standing Facility (MSF), Governor Shaktikanta Das said on December 8.
“Given that the usage of the MSF window has been rare due to surplus liquidity conditions, we propose to return to the normal dispensation under the MSF. Consequently, banks will be able to dip up to 2 percent of net demand and time liabilities (NDTL) instead of 3 percent for overnight borrowing under the MSF from January 1, 2022,” Das said while announcing the bi-monthly monetary policy review.
This dispensation that was provided at the beginning of the pandemic had boosted market confidence at a crucial time, he added. The MSF rate and the bank rate remain unchanged at 4.25 percent, Das informed. Read full here
RBI monetary policy: Shaktikanta Das enhances VRRR auctions, says liquidity will be rebalanced in 'non-disruptive' manner
Reserve Bank of India (RBI) Governor Shaktikanta Das on December 8 announced that the variable rate reverse repo (VRRR) auction amount will be progressively enhanced to Rs 7.5 lakh crore by December 31. The central bank would continue to rebalance liquidity conditions in a non-disruptive manner, Das said, as he shared the outcome of the monetary policy committee (MPC) meeting.
"It is now proposed to enhance the 14-day VRRR auction amounts on a fortnightly basis in the following manner: Rs 6.5 lakh crore on December 17; and further to Rs 7.5 lakh crore on December 31. Consequently, from January 2022 onwards, liquidity absorption will be undertaken mainly through the auction route,” Das said. Read full here
RBI Monetary Policy Update | Reaction: Rohit Poddar, Managing Director, Poddar Housing and Development
The RBI’s decision to maintain the repo rate unchanged at 4%, point towards the road to economic recovery. An overall economic activity progressing towards retained inflation is a good news and showcases that the overall economic activity in the country has evolved.
While the rise in commodity prices has put upward pressure on input material costs, economy's low-interest rate has been a major contributor to the housing sector's recovery. When the real estate industry was just getting back on its feet, it was slammed by the new variant. The new COVID variant Omicron has again pushed the global and Indian economy into a state of uncertainty and nervousness.
In order to encourage consumption and investment in the real estate sector, consistent demand stimulant measures and favorable financing conditions would be required. Compare to last year, we are in a much better place owing to the proactive measures taken by the government which is resulting into achieving stability in the economic fundamentals of the country.
RBI Monetary Policy: Economy Not Yet Strong Enough For Self-sustaining, Needs Policy Support, Says Shaktikanta Das
Speaking after the MPC meeting, Das said that the private consumption is still below pre-pandemic levels... Read More
RBI Monetary Policy Update |
The overarching priority of the RBI at present is growth. At the same time, we will not lose sight on price stability: RBI Governor Shaktikanta Das
RBI Monetary Policy Update | Reaction: Lakshmi Iyer, CIO – Debt & Head – Products, Kotak Mahindra Asset Management Company
In what seemed like a close call, the RBI MPC chose to maintain status quo on key benchmark rates. No material changes to growth and inflation forecasts too. This suggests RBIs caution on the recent developments on the pandemic front. While 14 day VRRR amount has been increased in a graded manner, there seems to be no sense of urgency on RBI’s part to initiate any abrupt liquidity drain out measures.
Bond markets should draw comfort from this decision and continue to trade range bound. Global cues to dominate the rate moves going forward.
RBI Monetary Policy: CPI Inflation Projected At 5.3% In 2021-22, Says Shaktikanta Das
RBI MPC: Shaktikanta Das said the headline inflation would peak in the fourth quarter of the current fiscal.... Read More
RBI Monetary Policy Update | RBI Governor Shaktikanta Das to CNBC-TV18
Activity in various segments of the economy has crossed pre-pandemic levels. Private investment, private consumption and few others are still lagging behind. The economy is facing several headwinds from mostly international factors. We are seeing a surge in infections in many advanced economies.It is unfair to compare Indian inflation dynamics with other countries.MPC judged better to be cautious at the current stage. Effort is to control the liquidity in market.We are undertaking long-term VRRRs as well.
Standing deposit facility will be used when it is needed. Measures used presently are more market friendly. We are looking at 4-4.3 percent inflation by then end of FY23, added RBI Deputy Governor Michael Patra.
Will study all charges and fees on digital payments before taking a call, said RBI Deputy Governor T Rabi Sankar
RBI Monetary Policy Update | Reaction: DRE Reddy, CEO and Managing Partner, CRCL LLP
It is a welcome move to keep key interest rates unchanged, reiterating an accommodative stance on both rates and liquidity. Food inflation is still a matter of concern, even as fuel inflation has risen, and CPI inflation and fuel inflation, have remained elevated.
Continued policy support is a good stance for growth. The Indian economy has recovered from its greatest slump; we are now better prepared to deal with the upcoming Omicron variant.
RBI Monetary Policy Update | Reaction: Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services
As expected, RBI keeps all policy rates unchanged today (some section was expecting a hike in reverse repo). Further, the RBI maintains its FY22 real GDP growth/inflation projections at 9.5%/ 5.3%. Overall, there were no surprises in the policy today and it was broadly a non-event.
Going forward, we fear that real GDP growth could be lower than the RBI projections, with inflation falling broadly in line. Along with the rising threat from the Omicron variant, *there is a possibility that a hike in reverse repo could be postponed further to April 2022.
However, if growth turns out to be better than our expectations (or in line with/better than RBI projections) and Omicron threat doesn't materialize, a 15bps hike in reverse repo rate in Feb'22 cannot be ruled out. In any case, the Union Budget 2022-23 will also play an important role in the next MPC meet.
RBI Monetary Policy: MPC Keeps Repo Rate Unchanged; Stance Accommodative
The rate-setting panel has maintained key lending rates for the ninth consecutive policy meeting... Read More
RBI Monetary Policy Update | Reaction: Deepthi Mathew, Economist at Geojit Financial Services
The decision to keep the rates unchanged was on the expected line. Though the economy is recovering, it is early to say that it is a broad-based recovery, which still requires support from the Central Bank. The growth-inflation trade-off is getting prominent in the global economy. The rising inflation rate has forced various central banks to increase the pace of monetary policy normalization.
However, there hasn't been any considerable revision on the inflation forecast by RBI and maintained it at 5.3 percent for FY22. As the favorable base effect wanes off from November 2021, we could expect some upward pressure in the inflation rate in the coming months.
RBI Monetary Policy LIVE | Rupee Opens
Indian rupee opened 7 paise higher at 75.37 per dollar on against previous close of 75.44 after Reserve Bank of India (RBI) has kept the key rate unchanged and maintained the accommodative stance.
US dollar increase by 0.04% yesterday amid rise in US treasury yields. Yields jumped on hopes that Omicron variant would be less harmful to economy than feared. However, sharp upside was capped on rise in risk appetite in the global markets, said ICICI Direct.
Rupee future maturing on December 29 depreciated marginally by 0.01% yesterday amid strong dollar, FII outflows and rise in crude oil prices, it added.
RBI Monetary Policy LIVE | Market LIVE Update
[At 10.20 am] Benchmark indices were holding on the opening gains after Reserve Bank of India (RBI) has kept the key rate unchanged and maintained the accommodative stance. The Sensex was up 714.58 points or 1.24% at 58348.23, and the Nifty ws up 205.90 points or 1.20% at 17382.60. About 2216 shares have advanced, 617 shares declined, and 96 shares are unchanged.
[At 11.20 am] Sensex is up 829.99 points or 1.44% at 58463.64, and the Nifty jumped 237.30 points or 1.38% at 17414. Bajaj Finance, ICICI Bank, Bajaj Finserv and Infosys are the top gainers while ICICI Bank, FSN E-Co(Nykaa) and Reliance Industries are the most active stocks. All sectoral indices are trading in the green led by financials, IT and realty. The midcap and smallcap indices added a percent each. Catch full LIVE blog here
RBI Monetary Policy LIVE | Here are the key highlights of the RBI MPC announcement
>> RBI keeps repo rate unchanged at 4 percent
>>Reverse repo rate also remains unchanged at 3.35 percent.
>>The MPC voted unanimously 5:1 to maintain 'accomodative' stance.
>>The marginal standing facility (MSF) has also been left unchanged at 4.25 percent.
>>Projection for real GDP growth is maintained at 9.5 percent. The central bank has however revised its Q3FY22 GDP growth to 6.6 percent from earlier 6.8 percent, and cut Q4FY22 GDP to 6 percent from 6.1 percent. Meanwhile, the RBI has cut Q4FY22 GDP to 6 percent from 6.1 percent earlier; and FY22 CPI inflation target has been maintained at 5.3 percent.
>>FY22 CPI inflation target maintained at 5.3 percent. The October-December CPI inflation target has been revised to 5.1 percent from 4.5 percent earlier; while January-March CPI inflation forecast has been revised to 5.7 percent compared to 5.8 percent earlier.
>>The Q1FY23 GDP growth forecast has been retained at 17.2 percent; Q2FY23 GDP growth seen at 7.8 percent; Q1FY23 CPI forecast revised to 5 percent from 5.2 percent; and Q2FY23 CPI forecase seen at 5 percent.
>>From January 2022, liquidity adjustment will be mainly via the Variable Reverse Repo Auction. Headline CPI inflation is expected to peak in Q4 and soften thereafter.
>>Proposed return to normal dispensation under MSF Window, as the “RBI remains committed to our ‘accommodative’ stance to broaden growth impulses”.
>>Financial conditions turning increasingly volatile and there is considerable uncertainty over growth-inflation dynamics, thus RBI will continue to rebalance liquidity conditions in a non-disruptive manner.
>>The aim is to re-establish 14-day Variable Reverse Repo Rate (VRRR) as the main liquidity operation. The RBI is to absorb Rs 6.5 lakh crore in VRRR auction on December 17 and absorb Rs 7.5 lakh crore in VRRR auction on December 31.
>>RBI retains flexibility to fine-tune liquidity operations. It will allow banks to make one-time pre-payment with respect to TLTROs announced.
>>The RBI will release a discussion paper on charges on digital payments.
>>It is to also launch Unified Payments Interface (UPI)-based Feature Phone Products.
>>Further, UPI caps for gilts, retail and IPOs are to be enhanced to Rs 5 lakh
RBI Monetary Policy LIVE |
The RBI will release a discussion paper on charges on digital payments. It is to also launch Unified Payments Interface (UPI)-based Feature Phone Products. Further, UPI caps for gilts, retail and IPOs are to be enhanced to Rs 5 lakh: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
The aim is to re-establish 14-day Variable Reverse Repo Rate (VRRR) as the main liquidity operation. The RBI is to absorb Rs 6.5 lakh crore in VRRR auction on December 17 and absorb Rs 7.5 lakh crore in VRRR auction on December 31. We retain flexibilty to fine-tune liquidity operations. The RBI will allow banks to make one-time pre-payment with respect to TLTROs announced: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
Financial conditions turning increasingly volatile and there is considerable uncertainty over growth-inflation dynamics. We will continue to rebalance liquidity conditions in a non-disruptive manner: Governor Shaktikanta Das
RBI Monetary Policy LIVE | Here are the key highlights of the RBI MPC announcement
>> RBI keeps repo rate unchanged at 4 percent, the reverse repo rate also remains unchanged at 3.35 percent. The MPC voted unanimously 5:1 to maintain 'accomodative' stance. Further, the marginal standing facility has also been left unchanged at 4.25 percent.
>>Projection for real GDP growth is maintained at 9.5 percent. The central bank has however revised its Q3FY22 GDP growth to 6.6 percent from earlier 6.8 percent, and cut Q4FY22 GDP to 6 percent from 6.1 percent. Meanwhile, the RBI has cut Q4FY22 GDP to 6 percent from 6.1 percent earlier; and FY22 CPI inflation target has been maintained at 5.3 percent.
>>FY22 CPI inflation target maintained at 5.3 percent. The October-December CPI inflation target has been revised to 5.1 percent from 4.5 percent earlier; while January-March CPI inflation forecast has been revised to 5.7 percent compared to 5.8 percent earlier.
>>The Q1FY23 GDP growth forecast has been retained at 17.2 percent; Q2FY23 GDP growth seen at 7.8 percent; Q1FY23 CPI forecast revised to 5 percent from 5.2 percent; and Q2FY23 CPI forecase seen at 5 percent.
RBI Monetary Policy LIVE |
The Q1FY23 GDP growth forecast has been retained at 17.2 percent; Q2FY23 GDP growth seen at 7.8 percent; Q1FY23 CPI forecast revised to 5 percent from 5.2 percent; and Q2FY23 CPI forecase seen at 5 percent: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
FY22 CPI inflation target maintained at 5.3 percent. The October-December CPI inflation target has been revised to 5.1 percent from 4.5 percent earlier; while January-March CPI inflation forecast has been revised to 5.7 percent compared to 5.8 percent earlier: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
From January 2022, liquidity adjustment will be mainly via the Variable Reverser Repo Auction. We expect headline CPI inflation to peak in Q4 and soften thereafter. We propose to return to normal dispensation under Marginal Standing Facility (MSF) Window. The RBI remains committed to our accomodative stance to broaden growth impulses: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
MPC notes that crude oil prices have eased, that consumption demand has been improving and rural demand is exhibiting resilience. Recovery in the Indian economy is gathering traction. Government consumption has picked up from October 2021. The recent tax cuts on petrol and diesel should help in crowding-in private investment. There has been significant deleveraging of corporate balance sheet. Government's focus on Capex should help in crowding-in private investment: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
'We hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy - COVID-19. The domestic economic outlook is somewhat clouded by Omicron variant: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
Recent tax cuts on petrol/diesel should support consumer purchasing power: Governor Shaktikanta Das
RBI Monetary Policy LIVE |
Projection for real GDP growth is maintained at 9.5 percent. The central bank has however revised its Q3FY22 GDP growth to 6.6 percent from earlier 6.8 percent, and cut Q4FY22 GDP to 6 percent from 6.1 percent. Meanwhile, the RBI has cut Q4FY22 GDP to 6 percent from 6.1 percent earlier; and FY22 CPI inflation target has been maintained at 5.3 percent: RBI Governor Shaktikanta Das
RBI Monetary Policy LIVE |
RBI keeps repo rate unchanged at 4 percent, the reverse repo rate also remains unchanged at 3.35 percent. The MPC voted unanimously 5:1 to maintain 'accomodative' stance. Further, the marginal standing facility has also been left unchanged at 4.25 percent:
Governor Shaktikanta DasRBI Monetary Policy LIVE | BREAKING:
Repo rate unchanged at 4% and stance remains accomodative as long as needed for the economy: RBI Governor Shaktikanta Das
Just In | RBI MPC announcement begins
RBI Monetary Policy Meet Today: What To Expect
Being risk averse by disposition, the Monetary Policy Committee and the RBI will probably choose to be conservative, given evolving risks, and will hold off on normalisation till February, when the…... Read More
RBI Monetary Policy LIVE | Saugata Bhattacharya, Executive Vice President and Chief Economist, Axis Bank
Inflation, on the other hand, remains a worry. Although the MPC will be going into its review with two moderate CPI inflation prints for September and October, these were partially due to favourable base effects, which forecasts suggest will weaken in Q4 FY22, thereby leading to a sharp rise to a forecast 5.9 percent (from an expected 5 percent in Q3). Fortunately, the drop in crude oil prices due to the combination of the Omicron concerns, and concerted action to release strategic oil reserve, is likely to provide some relief, but there are fears that this might be short lived.
Being risk averse both by its mandate and disposition, the MPC and the RBI will probably choose to be conservative given evolving risks, and will hold off on normalisation till February, when the public health risks become clearer. (5/5)
RBI Monetary Policy LIVE | Saugata Bhattacharya, Executive Vice President and Chief Economist, Axis Bank
Axis Bank’s Composite Leading Indicator index, tracking 39 nowcasting type data fields, had suggested a sharp rise in October. In addition to the indicators mentioned above, we observed a sharp rise in e-way bills, which are filed-in GST returns (from a low of 4 crore in June ’21 to 5.5 crores in July, and then on to 7.4 crore in October). The GST collections have also validated this, with latest reports of Rs 1.37 lakh-crore collected as GST in November (reflecting returns of activity in October).
There had been a slowdown in November, after the festival season stocking, but activity is primarily seen in e-way bills in the second half of November. The marriage season (generally the winter months) is reported to be robust. On the rural front, other than government subventions, after a record kharif harvest, the conditions for a good rabi harvest are also encouraging. (4/5)
RBI Monetary Policy LIVE | Saugata Bhattacharya, Executive Vice President and Chief Economist, Axis Bank
In India, there were signs of a good pre-festive demand activity in September and October. Retailers had reported a pickup in consumer durables sales, although probably not at extraordinary levels. October exports had remained strong, although some of this was probably due to high crude oil, metals, and commodity prices. Exporters’ order books were also reported to be strong, with inability to fulfil the orders due to supply dislocations.
The Manufacturing PMI had started to rise since September, indicating rising output (although even here, some part would be due to rising input costs and output prices). Surprisingly, even Services PMI had started to rise quite sharply (from 45.4 in July to 58.4 in October). This is corroborated by rising air and surface travel, rising freight loadings, and Google Mobility metrics of travel for recreation, and for groceries and pharmacies. (3/5)
RBI Monetary Policy LIVE | Saugata Bhattacharya, Executive Vice President and Chief Economist, Axis Bank
Other than the potential fresh public health uncertainty, the recent and expected growth-inflation trade-off dynamics had warranted a start of normalisation, which had been pointed out by some MPC members during the last policy review in October.
The recovery, both globally and in India, continues, although the momentum has been decelerating, and China’s loss of growth momentum is becoming a matter of increasing concern. In many of the large developed countries, inflation has remained high over the past few months, and is expected to persist into the first half of 2022. Labour markets, particularly in the United States and the United Kingdom, remain tight, engendering concerns of wage inflation spilling over into wider price pressures. There is a shortage of labour across a range of professions, further exacerbating price pressures. Housing markets remain strong in many geographies.
The US Federal Reserve has initiated a tapering of its Quantitative Easing (QE) bond purchase programme, starting in November itself, and scheduled to complete in June 2022. The Bank of England has been signalling a hawkish approach to normalisation, even though it surprised markets by voting with a large majority on a stay. Many smaller advanced economy, and emerging markets central banks have increased their policy rates. (2/5)
RBI Monetary Policy LIVE | Saugata Bhattacharya, Executive Vice President and Chief Economist, Axis Bank
Before the Omicron variant of COVID-19 took over the epidemiological and markets discourse, there was a reasonable likelihood that the Monetary Policy Committee would signal to the Reserve Bank of India (RBI) would start the normalisation process of monetary policy at its December 6-8 meeting with a small, maybe 15 basis point, hike in the reverse repo rate.
It has to be noted here that changing the reverse repo rate, and consequently the width of the policy rates corridor, is the domain of the RBI, not the MPC. But the balance of probability has again shifted towards a status quo, given the emerging uncertainties due to travel and other restrictions due to a fear of a renewed wave of infections.
The RBI has emphatically communicated on multiple occasions that it will proceed with normalisation not in a time dependent, but a state dependent (with a data driven approach) in a gradual, and calibrated fashion with advance telegraphing. This it has already done with the steady rise in both the average and cut off yields in the Variable Rate Reverse Repo (VRRR) auctions. (1/5)
RBI Monetary Policy LIVE | Chart of the Day | Ahead of MPC call, what does India’s financial conditions index tell us? (MC PRO)
Financial conditions have tightened considerably for most emerging market economies. How long will it be before India follows suit? Read more here
RBI Monetary Policy LIVE | Chart of the Day: Ahead of MPC call, what does India’s financial conditions index tell us? (MC PRO)
Financial conditions have tightened considerably for most emerging market economies. How long will it be before India follows suit? Read more here
