RBI cut repo rate by 35 basis points; Maintains adjustable stance

RBI cuts repo rate by 35 basis points; maintains accommodative stance

• All members of the MPC unanimously voted to reduce the policy repo rate
• The MPC said that inflation is currently projected to remain within the target 12 months ahead on the horizon.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday reduced its repo rate to 35% to 5.4%. This is the fourth reduction in its key policy rate since Shaktikanta Das took over as governor of the central bank in December last year.

All members of the MPC unanimously voted to reduce the policy repo rate and to maintain an accommodative stance of monetary policy. Four members - Rabindra H. Dholakia, Michael Devvrat Patra, Vibhu Prasad Kanungo and Shaktikanta Das - voted to reduce the policy repo rate by 35 basis points, while two members - Chetan Ghat and Pami Dua - reduced the policy repo rate to 25. Voted. basis points.

The CPI inflation path is now estimated at 3.1% for the second quarter of FY15 and 3.5–3.7% for the second half of FY15, with the risk also balanced. Consumer Price Index (CPI) inflation for the first quarter of the fiscal year is estimated at 3.6%. The MPC also increased the growth of GDP from 5% in August 2014 to 5% in June 2014. also%, which is somewhat fatigued with a risk of 5.ised-4.7% in the first half of FY2010 and 7.3-5.5% for the second half. Down. The GDP growth for the first quarter of FY15 is estimated at 7.4%.

The MPC said that currently inflation is projected to remain within the target of 12 months ahead of the horizon.

“Since the previous policy, domestic economic activity has remained weak, with downside risks due to the global recession and rising trade tensions. Private consumption, the mainstay of main demand, and investment activity remain sluggish, ”it said.

The MPC said that while past rate cuts are slowly being transferred to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap. He said addressing the concerns of growth by increasing aggregate demand, especially private investment, is the highest priority at the moment, keeping in line with the mandate of inflation.

The central bank also stated that liquidity in the system was in large surplus in June-July 2019 due to the return of currency in the banking system; Withdrawal of excess cash reserve ratio (CRR) balance by banks; Open Market Operation (OMO) Purchase Auction; And RBI's foreign exchange market operations.

The RBI said it absorbed liquidity of ₹ 51,710 crore in June, illion 1.30 trillion in July and August 2.04 trillion in August (as of August 6, 2019) on a daily net average basis under LAF.