Thursday, 5 December 2019


*RBI Monetary Policy - Key Takeaways*

* Repo rate unchanged at 5.15%
* Reverse repo rate stays unchanged at 4.90%
* MSF, Bank Rate unchanged at 5.40%
* MPC unanimously votes for status quo on repo rate
* Based on CPI-GDP dynamics, MPC felt pause was appropriate
* MPC recognises "there is monetary policy space for future"
* MPC to continue with accommodative stance
* MPC's accommodative stance "as long as it is necessary"
* MPC stance aimed to revive growth while ensuring CPI in band
* CPI projection raised to 4.7-5.1% Oct-Mar
* CPI projection raised to 3.8-4.0% Apr-Sep 2020
* Risks to inflation projections "broadly balanced"
* MPC sees inflation rising in near-term
* MPC sees CPI moderate below target by Jul-Sep 2020
* Need to carefully monitor fresh data for CPI outlook clarity
* FY20 real GDP growth seen 5.0% from 6.1% set in Oct
* Oct-Mar GDP seen 4.9-5.5%
* Apr-Sep 2020 GDP seen 5.9-6.3%
* MPC notes economic activity has weakened further
* MPC sees govt, policy steps gradually feed into real economy
* Data showing some early signs of recovery in invest activity
* Need to see sustainability of investment activity recovery
* MPC sees need to address impediments holding back investment
* MPC sees external benchmarks strengthen monetary transmission
* Need greater flexibility in small savings rate adjustments
* See FY21 Budget provide insight into further steps by govt
* see FY21 Budget shed light on govt policy impact on growth
* MPC meeting minutes to be published on Dec 19
* Next MPC meeting to be held from Feb 4-6
* Delay in domestic demand revival downside risk for GDP
* Slower domestic demand reflecting in softening in CPI
* See price rise in milk, pulses, sugar sustaining
* Oct CPI print "was much higher than expected"
* FX reserves at $451.7 bln on Dec 3, up $38.8 bln from Mar 31
* Net disbursals of FX borrowings up $11.5 bln Apr-Oct
* Median bank term deposit rates down 47 bps Feb-Nov
* Bank deposit rate down by 9 bps Oct vs just 7 bps in Feb-Sep
* Fall in deposit rate augurs well for loan rate transmission


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