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RBI: Highlights from the February monetary policy announcements

RBI monetary policy in India-

The central bank has maintained its policy stance at “accommodative”, while the reverse repo rate has been maintained at 4.90 percent.All six MPC members voted in favour of the policy move.

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.15 percent in its February meeting on the back of rising retail inflation. This is the second time in a row that the central bank has left the repo rate unchanged.

The central bank has maintained its policy stance at “accommodative”, while the reverse repo rate has been maintained at 4.90 percent.

The February MPC is the last of the current financial year and the first of the new decade.

Highlights of the February MPC announcement:

RBI MPC: Highlights from the February monetary policy announcements

RBI maintains status quo, leaves repo rate unchanged at 5.15 percent

“Accommodative” stance maintained for as long as necessary to revive growth, while ensuring inflation remains within target

CPI forecast for Q4FY20 revised up to 6.5 per cent vs 5.1-4.7 percent for 2HFY20 seen earlier

CPI for 1HFY21 revised up to 5.4-5 percent from 4-3.8 percent projected earlier

CPI for Q3FY21 seen at 3.2 percent

GDP growth projection for FY20 retained at 5 percent

GDP growth projection for FY21 at 6 percent

GDP growth forecast for 1H FY21 seen at 5.5-6 percent, Q3 at 6.2 percent

All six MPC members voted in favour of the policy move

Inflation

Inflation outlook is likely to be influenced by several factors going forward

Decline in food inflation expected to be more pronounced during Q4FY20 as onion prices fall

Higher vegetables production likely to have a salutary impact on food inflation

Recent pick-up in prices of non-vegetable food items likely to sustain

Crude prices likely to remain volatile due to geopolitical tensions in Middle , uncertain global economic outlook

Subdued demand conditions, muted pricing power of corporates, correction in energy prices may limit the pass-through to selling prices

Domestic financial markets remain volatile, may have an influence on the inflation outlook

Base effects would turn favourable during .

Increase in customs duties on retail consumption items may result in only a marginal one-time uptick in inflation

Other important non-policy announcements-

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