Skip to main content

RBI’s Acharya suggests shift in monetary policy stance, show minutes

By
RBI’s Acharya suggests shift in monetary policy stance, show minutes
One member of the Reserve Bank of India’s (RBI’s) rate-setting panel suggested starting the process of shifting the monetary policy stance from neutral to “withdrawal of accommodation”, increasing the odds of a rate hike this year.
Noting the upside risks to inflation, Viral Acharya, RBI deputy governor, said he is likely to shift decisively to vote for a beginning of “withdrawal of accommodation” at the next Monetary Policy Committee (MPC) meeting in June.
“Reinforcement of inflationtargeting credibility that such a shift would signal is crucial in my view for prudent macroeconomic management, on both the domestic and external sector fronts,” he said
According to Gaurav Kapur, chief economist at IndusInd Bank, a combination of risk factors, both on the demand and supply side, should play out for changing the monetary policy stance to restrictive from neutral. “Such a shift is unlikely in June because there may not be adequate information. However, going by the projected inflation path, probability of a rate hike in August has increased,” he said.
Rupa Rege Nitsure, group chief economist at L&T Financial Services, said it will be prudent if MPC members wait to see firmer signs of sustainable growth before withdrawing the accommodation.
“After considering the major seasonal and structural factors, we do not see inflation emerging as a major macro risk until oil prices cross $75 level. Muted consumption demand in urban belts and curtailed lending capacity of PSBs to MSMEs may most probably throw a negative surprise on the growth front,” she said.
On 5 April, MPC decided to keep rates on hold with 5 of the 6 members voting in favour of the decision. Michael Patra, executive director of RBI, called for a 25 basis points hike in the repo rate, the rate at which the central bank infuses liquidity into the banking system. In the policy, RBI said there are several uncertainties surrounding the baseline inflation path. This included impact of the revised formula for minimum support prices (MSP) and staggered implementation of house rent allowance (HRA), volatility in crude oil prices, and rise in input prices by firms. It had also said that there are risks in case of further fiscal slippage and should the monsoon turn deficient.
The latest data shows retail inflation decelerated for the fourth consecutive month to 4.28% in March on the back of softening food prices.
The Mint, New Delhi, 20th April 2018
---------------

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

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more