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RBI Monetary Policy LIVE: MPC keeps repo rate steady, says the priority is to nurture growth; retains GDP target

The Monetary Policy Committee of the Reserve Bank of India has held the repo rate at 4% unaltered. The RBI has kept rates unchanged for the seventh consecutive MPC.

MPC has agreed to keep the repo rate unchanged and maintain the accommodative stance as long as necessary to sustain growth, according to RBI Governor Shaktikanta Das. While the current reverse repo rate is 3.35 percent.

Monetary policy: RBI

The announcement comes after the six-member MPC began a three-day review meeting on Wednesday. The majority of economists predicted the RBI’s MPC to maintain the key lending rate at 0.75%.

The MPC kept rates unchanged and maintained its accommodating stance, as expected. Despite the fact that the MPC decided unanimously to leave the rates unchanged, the continuation of the accommodative posture received a 5:1 majority of votes. It demonstrates that the inflation discussion is gaining traction. The inflation rate prediction for FY22 has been raised to 5.7 percent from 5.1 percent previously.

What are economists saying about the Monitory Policy?

The central bank maintains its belief, that a fast withdrawal of monetary policy support would jeopardize the ongoing economic recovery. As a result, economists expect the RBI to begin policy normalization only in the fourth quarter of this fiscal year.

Monetary policy

According to Das, India is in a far better position now than it was in June of 2021. Das, also added that the vaccine production and administration are steadily increasing; yet, we must not let our guard down and remain watchful against the prospect of a third wave. According to the Governor of RBI, rural demand would drive private consumption, while urban demand will drive services and pent-up demand.

The RBI’s Governor reiterated that the RBI’s main priority will be “to support growth within the context of financial stability.” The RBI is rightfully concerned that any shift away from the current pro-growth monetary policy could “kill the embryonic and shaky recovery.” “The central bank’s communication speaks well for the economy’s growth impulses to continue,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. For more such updates, keep watching this space!

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RBI Announces Monetary Policy for FY 2021-22

RBI Monetary policy 2021: Based on an assessment of the current and evolving macroeconomic situation the monetary policy committee at its meeting today decided to keep the repo rate under the liquidity adjustment facility at 4.0 percent.

The monetary policy committee of India

It is a six-member committee. In this, there are three RBI members, and three nominated members by the government which is headed by the RBI governor.

There are few terms and theory we will discuss which will help us understand the monetary policy. And we will also understand how RBI policies are helping to sustain our GDP. The central bank lowered down the GDP to 9.5%.

Repo rate is an important factor. To maintain the GDP it is the same for the 6th time. Repo rate is the rate at which the bank can take loans from RBI. In this way, RBI will give loans to banks at low rates and as a result, the bank will provide loans to the public at low rates.

What RBI says about Repo Rate?

RBI says, how the second wave of Covid-19 came, has changed the outlook. We have to track other ways for example- active monitoring and time measures because they are essential to support the GDP. We need all kinds of supports like fiscal, monetary, or sectorial to come to normal situations again.

CPI Estimate Chart

Estimation of CPI

Inflation Trajectory

To control inflation, we need to increase the repo rate. RBI says that inflation is not a concern, for now. To understand this, we need to know what the Average inflation should be? The average inflation should be only 4%. This year it will be 5.4% in quarter two.

Graph

The inflation trajectory will go upside as there is a rise in international prices of crude oil, logistics costs, etc. Above all, the central and state govt. are told to lower the excise duties, cess, and to keep a check on edible oil prices, pulse market.

What is G-SAP?

G-SAP is a Government Security Acquisition program that includes purchasing and selling of bonds.

RBI is purchasing bonds of 1.20 lac crores from the market. In conclusion, the market will regain liquidity. Moreover, RBI has already purchased the 60,000 crores of bond under the first G-sap. Hence, liquidity of 60,000 crores is already have come to the market.

For more updates like these, keep watching this space!