As is widely expected, the Reserve Bank of India (RBI) has kept the key policy rates unchanged.
On the basis of an assessment of the current and evolving macro-economic situation, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.
It has also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL). And, it has said that it will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate, and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions. Also, it has decided to continue with daily one-day term repos and reverse repos to smooth liquidity.
As a result of these decisions, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the bank rate at 9.0 per cent
“The headline inflation has been receding steadily, and current readings are below the January 2015 target of 8 per cent as well as the January 2016 target of 6 per cent,'' the RBI said. “The inflation reading for November, which will become available by mid-December, is expected to show a further softening. Thereafter, however, the favourable base effect that is driving down headline inflation will likely dissipate and inflation for December may well rise above current levels,'' it added.
“The key uncertainty is the durability of this upturn,'' the apex bank said. “The full outcome of the north-east monsoon will determine the intensity of price pressures relating to cereals, oilseeds and pulses. However, it is reasonable to expect some firming up of these prices in view of the monsoon’s performance so far and the shortfall estimated for kharif production,'' it pointed out.
“Risks from imported inflation appear to be retreating, given the softening of international commodity prices, especially crude, and reasonable stability in the foreign exchange market,'' the RBI said. Accordingly, the central forecast for CPI inflation is revised down to 6 per cent for March 2015.
On the basis of an assessment of the current and evolving macro-economic situation, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.
It has also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL). And, it has said that it will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate, and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions. Also, it has decided to continue with daily one-day term repos and reverse repos to smooth liquidity.
As a result of these decisions, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the bank rate at 9.0 per cent
“The headline inflation has been receding steadily, and current readings are below the January 2015 target of 8 per cent as well as the January 2016 target of 6 per cent,'' the RBI said. “The inflation reading for November, which will become available by mid-December, is expected to show a further softening. Thereafter, however, the favourable base effect that is driving down headline inflation will likely dissipate and inflation for December may well rise above current levels,'' it added.
“The key uncertainty is the durability of this upturn,'' the apex bank said. “The full outcome of the north-east monsoon will determine the intensity of price pressures relating to cereals, oilseeds and pulses. However, it is reasonable to expect some firming up of these prices in view of the monsoon’s performance so far and the shortfall estimated for kharif production,'' it pointed out.
“Risks from imported inflation appear to be retreating, given the softening of international commodity prices, especially crude, and reasonable stability in the foreign exchange market,'' the RBI said. Accordingly, the central forecast for CPI inflation is revised down to 6 per cent for March 2015.
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