Skip to main content

RBI likely to hold rate next month

By
Monsoon uncertainty, increase in oil prices cloud inflation outlook
The Reserve Bank of India ( RBI) is expected to keep the interest rate unchanged on August 24, in its third bi- monthly monetary policy review for 2015- 16.
This was the near- unanimous response of 10 market participants in a poll conducted by Business
Standard. While nine of the respondents said they expected RBI to maintain the repo rate — the rate at which banks borrow from the central bank — at 7.25 per cent, only one said the rate could be reduced, by 25 basis points.
The market believes the outlook for inflation over the next few months depends on the monsoon rainfall during the rest of the season.
So, RBI Governor Raghuram Rajan might adopt a wait- andwatch approach for now. Besides, RBI had front- loaded the rate cut, with a 75- basis- point reduction since the start of 2015.
“Food prices remain at the mercy of exogenous events like rains.
As such, they also remain the biggest threat for RBI in its desire to lower inflation to four per cent by early- 2018,” said Pranjul Bhandari, chief India economist, HSBC Securities and Capital Markets ( India), in a note to clients.
India Meteorological Department (IMD) data show the monsoon this year ( June 1 to July 15) has so far been six per cent below normal across the country, despite good rains in June. And, there are areas that have so far got 20- 40 per cent less rainfall than normal. In these areas, if there is no strong pick- up, there are high chances of adrought.
Consumer Price Index ( CPI)based inflation rose to a ninemonth high of 5.4 per cent in June, mainly due to an increased rate of price rise in food items. RBI has set an inflation target of less than six per cent by January 2016 and four per cent (+/- 2 per cent) by the end of the two years starting 2016- 17.
Business Standard, New Delhi, 20th July 2015

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

By
  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...
Post a Comment
Read more