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RBI's 5th Bi-Monthly Monetary Policy FY18-19

Rate Unchanged with inflation revised downwards
05 December 2018
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    Key Highlights

    Unchanged policy with no hike and no stance change

    • Repo rate retained at 6.50 per cent with the stance of calibrated tightening
    • Inflation projection for FY19 & FY20 revised to 2.7 - 3.2 per cent in H2 (from 3.9 - 4.5 per cent) and 3.8-4.2 per cent in H1FY20 (from Q1 FY20 (4.8 per cent))
    • GDP growth estimates for FY19 have been retained at 7.4 per cent, with risks biased on the downside; policy notes that domestic activity has revived well and the output gap has closed
    • All MPC members have voted for the rate being maintained
    • 5 MPC members have voted for the stance being maintained with 1 member voting for change in stance to “Neutral”
    • Current inflation projections of RBI take into account a normal monsoon in 2019 with uncertainties emerging from food prices, full impact of MSP (Minimum Support Price), outlook on crude, fiscal slippage
    • In the media interactions, the Governor mentioned that the current policy reaction is to buy time to pause and reflect and MPC will need few more data points to ascertain the durability of current inflation trend. This is because the unexpected softening of food inflation and drop in crude prices has occurred in a relatively short period of time. If upcoming data points are favourable then MPC may take commensurate policy actions.
    • Timeline of reduction of Statutory Liquidity Ratio (SLR) from current level of 19 per cent to 18 per cent over a period of 4 quarters starting from January to March 2019 quarter, in order to align it with Liquidity Coverage Ratio (LCR) requirements