RBI Monetary Policy LIVE | 2020 will be recorded as a defining year in modern civilization, marked by #COVID19 pandemic, comparable in scale to Spanish Flu, with economic losses exceeding The Great Depression of 1930s. Alongside the human and economic tragedy, history will also record the unprecedented response by governments, central banks, healthcare systems, personnel and above all the common people. We have been able to contain human losses, ensure financial systems function normally and reached out to most vulnerable. Near-time financial losses have been contained, notes Das
RBI Monetary Policy LIVE | Inflation is likely to remain elevated. Signs of recovery far from being broad-based and small window available for proactive supply management strategies. It was hence decided to maintain status quo in policy rates. Year 2020 has been extremely challenging and our determination to fight and overcome stood out in this difficult year: Das
RBI Monetary Policy LIVE | RBI keeps Repo Rate unchanged at 4%. It has maintained “Accomodative” stance. The MPC voted unanimously to hold rates steady. Reverse Repo rate remains unchanged at 3.35%: Governor Das
JUST IN | MPC keeps repo rate unchanged at 4%
RBI Monetary Policy LIVE: Big Story | What to expect today?
RBI Monetary Policy LIVE: Big Story | What to expect today?” title=”RBI Monetary Policy LIVE: Big Story | What to expect today?
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Reserve Bank of India’s monetary policy committee (MPC) will announce the outcome of its three-day bi-monthly meeting on December 4. Here’s what to expect:
RBI Monetary Policy LIVE | Expectations
Amar Ambani, Senior President and Institutional Research Head at Yes Securities said the RBI will likely to adopt a “wait-and-watch” approach.
“With frequency indicators and GDP data conveying meaningful rebound in economic activity and retail inflation remaining stubbornly high, we not only expect the RBI to maintain status quo in Dec-20 policy meeting, but the minimal chance of a 25 bps rate cut in Feb-21 also appears to be fading away. The fact that liquidity remains high, while growth is gaining traction, makes us feel that RBI will adopt a wait-and-watch approach for next few months,” Ambani said.
RBI Monetary Policy LIVE | Expectations
A CNBC-TV18 poll of 20 economists found that none of the respondents expected the central bank to cut the repo rate. While, 53 analysts and economists who participated in a Reuters poll also said they expect the RBI to keep interest rates unchanged.
RBI Monetary Policy LIVE | MPC guidance: Why Jayant Varma’s dissent is important
In the last monetary policy committee (MPC) meeting (October 7-9) minutes, Jayant Varma made a note of dissent on technical grounds on the choice of words MPC used in its forward guidance. That was for the first time an MPC member questioned the accuracy of its forward guidance and emphasized the use of right words to save the credibility of the guidance itself. This revived an old debate. Read More here
RBI Monetary Policy LIVE | There is nothing that has dramatically changed since the last policy, except a minor improvement in the growth weakness, to change that stance. Hence, this week, the RBI policy is likely to largely be a non-event. Read more here
RBI Monetary Policy LIVE | Factors under consideration
Policy cues: If one goes by the October policy cues, the majority of the MPC panel is of the view that growth requires maximum attention amidst the pandemic rather than inflation. The minutes of the RBI’s MPC meeting of October 7-9 shows the rate setting panel is more worried about nosediving economic growth than high inflation, and will look for room for rate cuts if inflation eases to support growth.
“I recognise that there exists space for future rate cuts if inflation evolves in line with our expectations. This space needs to be used judiciously to support recovery in growth,” said RBI Governor Shaktikanta Das in the October policy minutes.
Michael Patra, deputy governor, even said it may take years for the economy to regain the lost output. “The projections of real GDP growth for 2020-21 that are set out for the first time in the MPC’s resolution provide a sense of the wounds on the soul of the economy inflicted by COVID-19,” Patra stated.
The MPC had said it would maintain an ‘accommodative’ stance “as long as necessary”, at least through this financial year and perhaps the next fiscal year to support growth.
RBI Monetary Policy LIVE | Factors under consideration
Liquidity focus: But monetary policy is not just about rates. While the MPC may hold the rates, the liquidity front could be where the action takes place. The abundant liquidity floating around in the system has caused short-term rates to crash.
Some borrowing at less than 3 per cent from the markets issuing 91-day CPs surprised dealers last week. Some mutual funds (MFs) were deploying surplus funds at corporate paper short-term rates that were too low, treasury dealers said. Banks have been parking a huge amount of money in the reverse repo window in the recent past.
High inflation is partly attributed to excess liquidity in the system. In this backdrop, the RBI may announce measures to absorb the excess liquidity in the system by offering bonds in special auctions.
The RBI has been maintaining an accommodative stance (which essentially means it is willing to cut rates or remain on hold). The MPC kept the key rates unchanged in the October policy review and continued with the accommodative stance to support growth. Since February 2019, the central bank has cut the key lending rate by 250 bps.
