RBI Monetary Policy Committee Highlights February 2018: The Monetary Policy Committee chaired by RBI Governor Urijit Patel announced its repo rate decision on Wednesday, 7 February 2018 at 2:30 pm. The Reserve Bank of India began it’s sixth and final bi-monthly policy meeting on 6 February 2018. The Reserve Bank of India in its sixth bi-monthly policy kept the repo rate unchanged under the liquidity adjustment facility (LAF) at 6%. Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%. The MPC (Monetary Policy Committee) of the Reserve Bank of India in its December review had kept the benchmark interest rate unchanged on concerns of a possible price rise.
RBI Monetary Policy Highlights February 2018:
4:00 pm: “The central bank’s stance was largely along expected lines, reflected in a relatively muted response in the bond and equity markets. There is only a slight shift towards a cautious bias, with headline inflation seen above target in FY19 – at above 5% in 1H FY19 and 4.5-4.6% in 2H. They remain optimistic on growth, expecting FY19 to head back towards 7%. The guidance remains data-dependent, with a shift to tighten rates requiring further evidence of a built-up in inflationary pressures. Details on the minimum support prices for the farm produce are awaited, along with the implications on demand conditions from a delayed fiscal consolidation roadmap. Policymakers are also likely to keep an eye on the financial stability risks, arising especially from global policy normalisation risks,” Radhika Rao, India Economist, DBS Bank said.
3:40 pm: Indian stock markets closed lower on Wednesday after the Reserve Bank of India kept the repo rates unchanged at 6% with Sensex finishing down 113.23 points or 0.33% at 34,082.71 and NSE Nifty ending 21.55 points or 0.21% lower at 10,476.7.
3:30 pm: Core sector growth decelerated in December due to contraction/deceleration in the production of coal, crude oil, steel and electricity. Acreage in the case of wheat, oilseeds and coarse cereals was lower than last year. As a result, the shortfall in area sown for rabi crops increased to (-)1.5% as on February 2 as compared with (-)1% on December 29, 2017.
3:20 pm: The Reserve Bank of India’s next meeting of the MPC (Monetary Policy Committee) is scheduled on April 4 and 5, 2018.
3:18 pm: The minutes of the MPC’s meeting will be published by February 21, 2018.
3:14 pm: The five members of RBI including Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Viral V. Acharya and Dr. Urjit R. Patel voted in favour of the monetary policy decision while Dr. Michael Debabrata Patra voted for an increase in the policy rate of 25 basis points.
3:12 pm: “There are five taxes on capital which will have an impact on investments. RBI will continue sharing dividend with the government in a mechanical way as per our fiscal year and significant deviations from fiscal stance would make matters more challenging for RBI,” RBI Governor Urijit Patel said.
3:10 pm: The focus of the Union Budget on the rural and infrastructure sectors is also a welcome development as it
would support rural incomes and investment, and in turn provide a further push to aggregate demand and economic
activity, the Reserve Bank of India said.
3:07 pm: The export growth expected to improve further on account of improving global demand, said RBI.
3:04 pm: Petrol and diesel prices rose sharply in January 2018, reflecting lagged pass-through of past increases in global crude prices.
3:02 pm: The exact magnitude of MSP rise on inflation cannot be fully assessed at this stage, says RBI.
3:00 pm: RBI says GST stabilising, economic activity picking up and early signs of investment revival.
2:57 pm: Accordingly, the MPC decided to keep the policy repo rate on hold and continue with the neutral stance. The MPC reiterates its commitment to keep headline inflation close to 4% on a durable basis.
2:55 pm: Apart from the direct impact on inflation, fiscal slippage has broader macro-financial implications, notably on economy-wide costs of borrowing which have already started to rise, said RBI.
2:53 pm: The MPC notes that the inflation outlook is clouded by several uncertainties on the upside.
2:51 pm: Turning to the growth outlook, GVA growth for 2017-18 is projected at 6.6%. The Reserve Bank of India lowered the economic growth projection for 2017-18 to 6.6% but said that it will accelerate to 7.2% in the next financial year as the roll-out of GST stabilises and credit offtake improves.
2:49 pm: During the two weeks beginning December 16, 2017, the Reserve Bank injected average daily net liquidity of Rs 388 billion into the system. For December as a whole, however, the Reserve Bank absorbed Rs 316 billion (on a net daily average basis). As the system turned into deficit again in the fourth week of January, the Reserve Bank injected average net liquidity of Rs 145 billion. For January, on the whole, the Reserve Bank absorbed Rs 353 billion (on a net daily average basis).
2:48 pm: The liquidity in the system continues to be in surplus mode, but it is moving steadily towards neutrality. The weighted average call rate (WACR) traded 12 basis points (bps) below the repo rate during December-January as against 15 bps below the repo rate in November.
2:46 pm: On the domestic front, the real gross value added (GVA) growth as per the first advance estimates (FAE) released by the Central Statistics Office (CSO) is estimated to decelerate to 6.1% in 2017-18 from 7.1% in 2016-17 due mainly to slowdown in agriculture and allied activities, mining and quarrying, manufacturing, and public administration and defence (PADO) services, RBI said.
2:45 pm: Equity markets have witnessed a sharp correction, both in AEs and EMEs. Bond yields in the US have hardened sharply, adding to the upward pressures seen during January, with a concomitant rise in bond yields in other AEs and EMEs. Forex markets have become volatile as well.
2:44 pm: Financial markets have become volatile in recent days due to uncertainty over the pace of normalisation of the US Fed monetary policy in view of January payrolls data showing rapidly accelerating wage growth and better than expected employment. The volatility index (VIX) has climbed to its highest level since Brexit.
2:43 pm: The MPC notes that the inflation outlook is clouded by several uncertainties on the upside. First, the staggered impact of HRA increases by various state governments may push up headline inflation further over the baseline in 2018-19, and potentially induce second-round effects.
2:42 pm: RBI lowers economic growth projection to 6.6% for 2017 -18, from 6.7%; estimates 7.2% growth in the next financial year 2018-2019.
2:41 pm: The process of recapitalisation of PSU banks and resolution proceedings under IBC should improve credit growth further, says RBI Governor.
2:39 pm: Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices.
2:38 pm: The inflation outlook beyond the current year is likely to be shaped by several factors.
2:36 pm: Inflation is now estimated at 5.1% in Q4 of the financial year 2017-2018, including the HRA impact.
2:34 pm: “The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth,” RBI said.
2:31 pm: The Reserve Bank of India in its sixth bi-monthly policy kept the repo rate unchanged under the liquidity adjustment facility (LAF) at 6%. Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%.
2:30 pm: RBI keeps the repo rate unchanged at 6%.
2:28 pm: RBI is about to announce its sixth Monetary Policy.
2:20 pm: Ahead of Reserve Bank of India’s MPC outcome, the Indian rupee was trading down 11 paise at 64.14 against the US dollar.
2:10 pm: There will be a room for MSP prices and fiscal stance.
2:05 pm: The Reserve Bank of India, in its last MPC meeting, projected a growth rate of 6.7% for FY18. This time, the RBI could peg the growth estimate at 7-7.5% for the financial year 2018-19.
1:54 pm: Indian stock markets slip into negative territory ahead of RBI’s Monetary Policy Committee. The S&P BSE Sensex was trading down 61.72 points or 0.18% at 34,134.22 while Nifty was trading 1.6 points or 0.02% lower at 10,496.65.
1:40 pm: We do recognise that RBI will sound cautious on fiscal slippage and rising crude oil price, Madhvi Arora, Economist at Kotak Institutional Equities told FE Online.
1:30 pm: Liquidity remains tight in the system, no further cuts expected from RBI, SBI Chairman Rajnish Kumar said to CNBC TV18.
1:22 pm: After the NDA government presented the India Economic Survey 2018 to Parliament, Chief Economic Adviser Arvind Subramanian had indicated that the scope to lower the interest rates may be limited for RBI with growth picking up and inflation hardening.
1:15 pm: Several experts suggest that the main concern for the Reserve Bank of India will be the rising inflation trajectory, the MPC will also factor in the Union Budget 2018-19 presented by Finance Minister Arun Jaitley to Parliament earlier this month.
1:05 pm: Bankers and experts are of the view that for the third time in a row in the FY18, the Reserve Bank of India may keep the key repo-rate or short-term lending rate unchanged as inflation trajectory is likely to remain upward at a time when crude oil prices in international market has started firming up and government plans to raise crop support price.
12:55 pm: Retail inflation crossed the RBI’s comfort level and rose to 5.21% in December on increase in prices of food items. The retail inflation, based on Consumer Price Index (CPI), was 4.88% in November. In December 2015, it was 3.41%.
12:47 pm: Ahead of Reserve Bank of India’s Monetary Policy Committee, rate-sensitive stocks are trading mixed. The stocks which are likely to have an impact on repo rate cut or hike are mainly BFSI (Banking, Financial Services and Insurance). Among the PSU Bank stocks, shares of India’s largest bank State Bank of India was trading up 0.41% at Rs 292.95, Bank of Baroda was up 0.62% at Rs 155.4, IDBI Bank, Syndicate Bank and Indian Bank rose up to 1.4% while Punjab National Bank lost 1.4% to Rs 158.8.
12:42 pm: As inflationary concerns are reflecting in the current bond yields, market participants expect RBI might keep rates unchanged but signal a more hawkish stance.
12:35 pm: Many observers are also keenly looking out for any steps the Reserve Bank of India might take to boost market demand for central government securities, which are seeing reduced buying by public sector banks.
12:30 pm: A DBS Economics report has pointed out that while the modest cut in the fuel excise duties will help mitigate the pressure from higher oil prices, the RBI will closely watch the spill-over from the proposed MSPs into rural/farm wages and by extension, demand conditions.
12:25 pm: The market is expecting the Reserve Bank of India to provide some relief to address the demand-supply dynamics in the bond market. Public sector banks (PSBs) have reduced their buying in the central government securities market as they are believed to have taken considerable marked-to-market losses in the third quarter on surging yields.
12:20 pm: One of the major causes of concern on inflation is the government’s decision to keep the minimum support price (MSP) for all unannounced crops of the Kharif crop season at one and half times of their production cost.