Reserve Bank of India Eases

February 6, 2020

As expected, the Reserve Bank of India left policy settings unchanged, including a 5.15% repo rate, which previously had been cut by a total of 135 basis points between February and October of last year. A statement from the Monetary Policy Committee revised near-term inflation up due to higher onion prices, predicts that GDP will rise 6.0% next fiscal year, and recognizes

that there is policy space available for future action. The path of inflation is, however, elevated and on a rising trajectory through Q4:2019-20. The outlook for inflation is highly uncertain at this juncture. On the other hand, economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner. Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain status quo. Accordingly, the MPC decided to keep the policy repo rate unchanged and persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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