1. RBI monetary policy live: Eye on inflation, Urjit Patel keeps repo rate unchanged at 6.25%; Sensex, Nify turn positive at close

RBI monetary policy live: Eye on inflation, Urjit Patel keeps repo rate unchanged at 6.25%; Sensex, Nify turn positive at close

The Reserve Bank of India kept the repo rate unchanged at 6.25% in line with the expectations, as the Monetary Policy Committee did not want to take a 'premature' action, choosing to wait how inflation behaves later this year.

By: | Updated: June 7, 2017 4:27 PM
The Reserve Bank of India kept the repo rate unchanged at 6.25% in line with the expectations, as the Monetary Policy Committee did not want to take a ‘premature’ action, choosing to wait how inflation behaves later this year. (Image: Reuters)

The Reserve Bank of India kept the repo rate unchanged at 6.25% in line with the expectations, as the Monetary Policy Committee did not want to take a ‘premature’ action, choosing to wait how inflation behaves later this year. Most experts had expected the RBI to soften its tone and sound less hawkish in its second bi-monthly monetary and credit policy statement for the fiscal year 2017-18, factoring in the reduced fears of inflationary pressures. Experts had also said that there would be no change in the key policy interest rates though, as the central bank could adopt a wait and watch policy to see how inflation plays out when GST, the nation’s biggest tax reform, is implemented from 1 July.

The government, for sure, is rooting for a rate cut to boost falling GDP growth rate, down to 7.1 percent for the Financial Year 2016-17 from 8 percent in the previous fiscal year. Finance Minister Arun Jaitley said earlier this week that based on available indicators such as low inflation, stable oil prices, and lagging growth and investments, the MPC should look to cut policy rates.

Here are live updates in the run-up to the policy:

3.36 pm: Here’s what the RBI said about growth-inflation dynamics which forced its hand to keep the repo rate unchanged and maintain the policy stance at ‘neutral’.

3.31 pm: Stock markets cheer RBI policy decision to keep repo rate unchanged at 6.25%, as was widely expected. Benchmark indices end in green after trading flat for most of the day ahead of the monetary and credit policy statement. BSE Sensex provisionally ends up 0.32% at 31,290.34 points, while NSE Nifty ends up 0.28% at 9,663.9 points.

3.25 pm: RBI’s new CPI inflation projections for the current fiscal year 2017-18 at 2%-3.5% the first half is lower than 4.5% earlier, and at 3.5%-4.5% in the second half is down from 5% earlier.

3.20 pm: RBI Governor Urjit Patel says all MPC members declined the government’s request to meet before the policy. Experts hail MPC’s move to preserve institutional autonomy.

3.12 pm: Stock markets turn marginally positive as RBI keeps repo rate steady. BSE Sensex is trading up 0.27% at 31,274.68 points, while NSE Nifty is up 0.27% at 9,663.6 points.

3.10 pm: RBI Deputy Governor B P Kanungo says it is not fair to say that there is cash shortage on longer term basis. Kanungo says 82.6% of economy has been remonetised as per latest data.

3.04 pm: RBI Governor Urjit Patel says GDP slowdown is more due to fundamental factors that the government and policymakers need to address urgently.

3.01 pm: RBI Governor Urjit Patel says that recent GDP data shows that economy started slowing before demonetisation, adding that new WPI, IIP series present much better picture of economy.

2.59 pm: RBI says effects of demonetisation are sector specific and transient, adding that the GDP estimates attest effects of demonetisation on economy.

2.54 pm: RBI says April inflation surprised on the downside but adds that the reading imparted ‘considerable uncertainty’.

2.52 pm: RBI sees inflation rising to 3.5%-4.5% in the second half of the current financial year 2017-18, and for it to remain in the range of 2%-3.5% in the first half.

2.45 pm: RBI says farm loan waivers have raised risk of slippages, adds that recapitalisation of banks must be stepped up for credit growth. It says farm loan waiver is a path that needs to be tread carefully.

2.42 pm: RBI says GST rollout may not have material impact on inflation.

2.40 pm: RBI says the Monetary Policy Committee is focused on keeping CPI inflation close to 4% on a durable basis keeping in mind output gap. It needs to closely monitor underlying inflation pressure.

2.38 pm: RBI says keen to avoid ‘premature’ action at this stage, as premature action will result in a loss of credibility. The central bank added that it will need to assess if low inflation momentum will endure.

2.35 pm: RBI cuts SLR (statutory liquidity ratio) by 50 bps to 20% with effect from June 24.

2.30 pm: RBI keeps repo rate unchanged at 6.25%. Five of the six Monetary Policy Committee (MPC) members voted for status quo on rates, while 1 was not in favour.

2.15 pm: DBS Bank says RBI’s forward-looking approach may keep it from cutting rates despite receding inflation fears, as the adverse base effect later this year may push inflation back up to about 4%.

1.30 pm: Stock markets trade flat as RBI policy statement, due at 2.30 pm, inches closer. BSE Sensex slips below yesterday’s close, down 3.49 points at 31,187.07 points while Nifty 50 edges down 4.6 points to 9,633.55 points.

1.00 pm: All eyes on RBI’s bi-monthly monetary and credit policy review, where it is expected to keep repo rate steady in favour of watching out for effect of GST’s implementation on inflation, but is also likely to turn more dovish in its statement as risks to inflation have receded.

 

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