Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
RSS

News

Here’s why the RBI stayed put at 6.25%

Author: IANS/Thursday, June 22, 2017/Categories: Regulatory

Here’s why the RBI stayed put at 6.25%

Mumbai, June 21 (IANS) - RBI Governor Urjit Patel (pictured) cited "high uncertainty" on inflation while holding the central bank's key interest rate for the fourth successive policy review earlier this month, though it was the first time that a Monetary Policy Committee (MPC) member had voted against the majority decision, the minutes of the latest MPC meeting released on June 21 showed. 

At its second bi-monthly monetary policy review of the fiscal on June 7, the Reserve Bank of India maintained status quo on its repo, or short-term rate for lending to commercial banks, at 6.25%. In doing so, the policy statement said the six-member MPC was guided by the risks to inflation. 
 
"As the year progresses, underlying inflation pressures, especially input costs, wages and imported inflation, will have to be closely and continuously monitored," Patel said, as per the MPC meeting minutes. "The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers," he said. 
 
"At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th central pay commission's award are upside risks," he added. The RBI Governor, thus, argued for avoiding premature policy action. 

"Considering the high uncertainty clouding the near-term inflation outlook, there is a need to avoid premature policy action at this stage. I, therefore, vote for holding the policy repo rate at the current level of 6.25% and maintaining the neutral stance of monetary policy," Patel said.
 
"Premature action at this stage risks disruptive policy reversals later and the loss of credibility," he said. "The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place," he added. Instead, the sole dissenting external member and IIM-Ahmedabad faculty Ravindra Dholakia voted for a minimum a 50 basis point cut in the repo rate.
According to the minutes, Dholakia said there were several noteworthy recent developments on the prices and output fronts that warrant a decisive policy action by the MPC.
 
"In my opinion, this is the most opportune time for the MPC to effect a major cut of 50 basis points in the policy rate to bring it down from 6.25% to 5.75%," he said.
 
"All in all, the prevailing inflation and output conditions and prospects are such that there is enough space for a substantial rate cut of 50 basis points if not more," he added. Meanwhile, India's annual retail inflation eased to a record low of 2.18% in May on lower food prices. The wholesale price index (WPI), with the revised base year of 2011-12, also decelerated further in May 2017 to 2.17% from 3.85% in April as food prices eased.

Print Rate this article:
No rating

Number of views (327)/Comments (0)

S Vijaykrishnan
S Vijaykrishnan

IANS

Other posts by IANS
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free