RBI may ‘kill excess demand’ in economy in six-eight months

 The RBI increased the limit for keeping specified securities in the HTM portfolio from 22 per cent to 23 per cent

With inflation remaining at elevated levels, central banks around the world, including the Reserve Bank of India (RBI), will kill excess demand in economy over the next six to eight months, sources in the know said. They also indicated that there could be a rate hike in June, when the inflation forecast for the current financial year would be raised. The RBI, the sources said, might announce more steps such as raising the limit on held-to-maturity (HTM) bonds to support government borrowings but might not come out with any further quantitative easing GSAP (Government Securities …….

More scope to cut interest rates, says RBI Governor Shaktikanta Das

Das said he hoped a recent trade deal between the United States and China would hold and not be reversed

There is scope for cutting interest rates further and the central bank will use it when required after studying the growth and inflation data, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Monday. The monetary policy committee (MPC) surprised markets and analysts this month by holding rates steady after trimming the key interest rate by 135 basis points since the beginning of the current rate reduction cycle in February.

“While taking a pause we, very carefully and very definitely, said there is space for further monetary policy action, but the timing will have to be decided in a manner that its impact is optimum and its impact is maximised,” Das said at a conclave organised by the Times media group. Das said the markets were surprised when the committee started cutting rates in February but subsequently accepted that it was right in doing so. “And this time, the pause we have taken, I do hope that events will unfold in a manner which will prove that the MPC decision is right,” Shaktikanta Das said.

He said both the government and the central bank had taken steps to help the economy recover but the outcome of events in the global economy would play a role. Das said he hoped a recent trade deal between the United States and China would hold and not be reversed. The “Phase one” agreement reduces some US tariffs in exchange for a big jump in Chinese purchases. “What is important in the current context is coordinated and timely action by all the advanced and emerging economies to revive growth,” he said.

“Growth is an issue of discussion in India and global growth is also an issue of discussion because that does impact. For a moment, I am not implying that the slowdown that we have seen in India is entirely due to global factors, but it does impact growth prospects for India.”

Monetary policy review: Another rate cut may not help Indian economy

The larger problem here is that government finances are already in a hole; that would be a problem even if the tax cut were the best-designed in history

It’s almost universally expected in India that the central bank’s monetary policy committee will lower interest rates this week. Many expect it to keep cutting until the policy rate hits 5 per cent by the end of the year; it was 6 per cent in June, and the committee cut it by an unexpected 0.35 percentage points in its last meeting to bring it down to 5.4 per cent. The arguments for a cut are manifold: The Indian economy is clearly spluttering, with growth coming in at a shocking 5 per cent in the last quarter for which data is available; consumer price inflation stands at 3.2 per cent, well below the Reserve Bank of India’s mid-point target of 4 per cent; and industry is loudly complaining that high real rates are depressing investment.

Even the hawkish monetary policy committee, which critics complain has consistently over-estimated inflation in the past, is unlikely to be able to ignore that combination of factors. Reserve Bank of India Governor Shaktikanta Das told the Bloomberg India Economic Forum last month that “there’s room for a rate cut, especially when growth has slowed down.” The bond market has already been given reason to cheer this week, after the government kept its target for borrowing in the second half of the financial year constant, at Rs. 2.7 trillion.

But the RBI would be wise to be cautious. The government in New Delhi won reelection in May by throwing money at the electorate, particularly rural voters. More recently, panicked by the sharp slowdown in growth, it has responded with fiscal measures that are likely to stress its finances, including a big cut in corporate income tax rates last month (though the eventual fiscal stress of that cut might be less than originally feared, given that exemptions are also being phased out)….

Do you have an EMI? RBI rate hike to make your borrowings more expensive

The RBI raised interest rates to the highest in 2 years to tackle inflationary pressures

Planning to take a loan? You should not wait any longer. EMIs (equated monthly installments) on home, personal, auto and other loans are set to get costlier as the Reserve Bank of India (RBI) increased the repo rate by 25 basis points to 6.5 per cent from the previous rate of 6.25 per cent.

The RBI has also raised the reverse repo rate by 25 basis points to 6.25 per cent. The decision was taken during the RBI’s Monetary Policy Committee’s (MPC) bi-monthly meeting on Wednesday.

ALSO READ :  RBI monetary policy: Hike as expected; next increase likely in 2019

In its last monetary policy meeting on June 6, the RBI had already increased the repo rate by 25 bps (basis points). Headed by governor Urjit Patel, the central bank raised key policy rates to the highest in two years for the second time in a row in last two months to tackle inflationary pressures.

Over the last two bi-monthly MPC review meetings; there has been a total of 50 bps increase in the repo rate. The second-consecutive increase in repo rate comes as a shocker for those who are already paying EMIS, taken loans from banks or are planning to borrow in future.

ARTICLE SOURCE : BS 

RBI monetary policy: Repo rate kept unchanged at 6%

Statutory liquidity ratio reduced by 50 basis points to 19.5%

The Reserve Bank of India’s (RBI’s) six-member Monetary Policy Committee (MPC), headed by Governor Urjit Patel, on Wednesday kept the repo rate – the key policy rate at which the RBI lends money to banks – unchanged at six per cent, in a decision that was broadly in line with expectations.

The RBI reduced the gross value added (GVA) growth target for the current financial year to 6.7 per cent from 7.3 per cent earlier.(economy news)

 In its fourth bimonthly review of the monetary policy, the RBI, however, lowered the statutory liquidity ratio – the reserve requirement that commercial banks need to maintain in the form of gold or government-approved securities before providing credit to customers – by 50 basis points to 19.5 per cent, with effect from October 14 fortnight. The MPC voted 5-1 in favour of the status quo on both repo rate and reverse repo rate -- the latter was kept unchanged at 5.75 per cent.In the one year since the setting up of the MPC in October 2016, it has lowered the repo rate twice – by 25 basis points each in October 2016 and August 2017.

Most analysts had been expecting the central bank to maintain the status quo this time, but effect a rate cut later in the financial year. Some have even been saying that the rate-cut cycle, which started on January 15, 2015 with a rate reduction to 7.75 per cent from 8 per cent, might have reached its end.

Demonetisation's failure won't hurt PM Modi, he's already changed the narrative

Modi has learnt never to engage with his opponents and a hapless Opposition is trying to keep up

 

economy news:APCO Worldwide, a transnational public relations company, had their most apt pupil in then Gujarat chief minister Narendra Modi. The one thing Modi learnt was never to engage with his opponents on issues they want to talk about. He sets the agenda and a hapless opposition and media try to keep up. Demonetisation was a Modi-made disaster. Yet the disaster only served to propel Modi to greater electoral heights, and today, as he towers over a clueless opposition, even the return of 99% of the extinguished notes does not change the narrative of one man’s fight against corruption.

Modi had made an emotional pitch on demonetisation – “Give me 50 days, then punish me if I am wrong” – which was the lead story in all newspapers. Today who remembers that? Modi has moved on from “acche din” to “new India” and, like the Pied Piper, carried a mesmerised UP electorate with him. He swept the UP assembly, anointed Adityanath as chief minister and could not care less about what the opposition and media will now say.

ALSO READ: GDP growth hits 3-year low of 5.7%, slowest under Modi govt

Former Prime Minister Manmohan Singh had called demonetisation “an organised loot and legalised plunder”, and the venerable economist had a point. Modi, however, used demonetisation as a chance to reinvent himself as a “messiah of the poor”. The only jibe that struck home was Rahul Gandhi’s comment of a “suit boot ki sarkar” after Modi aired his Holland and Sherry Rs 10 lakh suit (with his name pinstriped on it) in his meeting with former US President Barack Obama.

The suit was auctioned off; the godmen and friends of the BJP are still present and in action; yet, with the demonetisation gamble, Modi achieved his aim.

ALSO READ: 99% of banned notes returned after demonetisation: RBI annual report

Modi and his closest aide, Amit Shah, are a ruthless-election winning combine. They give no quarter and expect none. No niceties of politics are maintained and the BJP has been transformed into a formidable election-fighting machine, modelled from the booth level upwards on the Congress of the 1950s. Modi himself is on 24/7 campaign mode. Consider this: until the Gujarat election later this year, he will make weekly trips to the state.

A senior member of the cabinet told me, “We are quiet in cabinet but occasionally the prime minister scoffs at the media. The opposition is never discussed as they have become irrelevant”.(READ FULL STORY)

Full text of RBI policy: Repo rate cut by 25 bps to 6%

The MPC noted that inflation excluding food and fuel has fallen significantly over the past 3 months

economy news : The Reserve Bank of India on Wednesday cut its main policy rate by a quarter percentage point to a more than 6-1/2 year low after inflation slumped.

RBI cut its repo rate by 25 basis points to 6.00 per cent - the lowest since November 2010 - as a slump in food prices sent June consumer inflation to a more than five-year low of 1.54 per cent.

The MPC noted that some of the upside risks to inflation have either reduced or not materialised:

(i) the baseline path of headline inflation excluding the HRA impact has fallen below the projection made in June to a little above 4 per cent by Q4

(ii) inflation excluding food and fuel has fallen significantly over the past three months

(iii) the roll-out of the GST has been smooth and the monsoon normal. Consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap. Accordingly, the MPC decided to reduce the policy repo rate by 25 basis points

Here is the full of text of 'Third Bi-monthly Monetary Policy Statement, 2017-18 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India':

On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to:

•reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.25 per cent to 6.0 per cent with immediate effect.

Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent......Read full article 

Lack of machines delayed counting of banned notes: RBI chief tells panel

Panel gives RBI Governor Urjit Patel 15 days to submit data on deposits of demonetised currency

Lack of adequate machines and related infra has delayed the counting of demonetised currency that has come back into the system, the Reserve Bank of India (RBI) Governor Urjit Patel is learnt to have told a parliamentary panel on Wednesday.

 

During the meeting that lasted more than three hours, Urjit Patel, according to sources said that the central bank is yet to arrive at the final figure since counting was still in progress.
The parliamentary standing committee on finance, that will table the report on demonetisation in the monsoon session starting July 17, gave the RBI chief 15 days time to submit data on deposits of invalidated Rs 500 and Rs 1,000 notes, besides counterfeit currency in circulation.
The RBI has cut staff holidays to complete the counting of currency which returned to the system after demonetisation, and has also ordered more machines to expedite the process, Patel told the panel, informed sources.
According to sources, the panel told Patel that since the RBI will have to close its accounts as on June 30 and prepare the balance sheet for 2016-17, it must be in a position to share the number.(economy news)
“While the governor shared some data, he did not give exact figures and said that they are still being counted,” said a source.
The RBI transfers its surplus to the Union government every year that ends on June 30.

The number's game
During the more than three-hour long meeting of the standing committee on finance, Patel took a lot of questions but members said he did not provide any “specific number” on the amount of money that came back to the system after November 8
In January too, the RBI governor had appeared before the committee and had told the members that he would submit a statement on the amount of money that came back into the system after demonetisation
Patel told the panel that the RBI has cut down on holidays to complete counting of the junked currency note and that its staff is working “round-the-clock” except on Sundays

Appearing before the panel for the second time, Patel was accompanied by three deputy RBI governors - B P Kanungo, S S Mundra and N S Vishwanathan...Read full story 

Full text: RBI keeps rates unchanged, cuts inflation projection

RBI keep the policy repo rate unchanged at 6.25%

 

ECONOMY NEWS| The Reserve Bank of India on Wednesday kept its policy repo rate unchanged at 6.25 percent, as widely expected, while lowering its projections for inflation after recent data showed consumer prices rising more slowly. RBI last changed the policy rate with a 25 basis points cut in October.

Here is the full text of the RBI policy

Second Bi-monthly Monetary Policy Statement, 2017-18 Resolution of the Monetary Policy Committee (MPC), Reserve Bank of India.

On the basis of an assessment of the current and evolving macroeconomic situation at its meeting on Wednesday, the Monetary Policy Committee (MPC) decided to:

1.  keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent.

Consequently, the reverse repo rate under the LAF remains at 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.50 per cent.

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. 

Assessment

2.  Since the April 2017 meeting of the MPC, globa economic activity has expanded at a modest pace, supported by firming growth in major advanced economies (AEs) and in some emerging market economies (EMEs) as well. In the US, a tightening labour market is generating wage gains. Alongside, industrial production has steadily improved in recent months and retail sales remain robust, although home sales ebbed in April. Political risks remain high, however. In the Euro area, the recovery has been underpinned by consistently falling unemployment, rising retail sales and a brighter outlook for manufacturing reflected in purchasing managers’ and business surveys. In Japan, exports supported by a depreciated yen and industrial activity are driving an acceleration in growth.  | READ MORE

LIVE RBI policy review: Will we see another surprise?

RBI policy review will take place at 2:30 pm

 

#COMPANIES| There is near unanimity that the six-member monetary policy committee of the Reserve Bank of India (RBI) would keep policy rates unchanged, but this being an annual policy, the event promises to discuss many issues that would set the stage for the next one year, including bad-debt resolution and liquidity management.

The repo rate is at 6.25 per cent now, while the RBI has changed its stance to 'neutral' from 'accommodative', indicating pause in a rate-cutting cycle. Core inflation, which is consumer price index (CPI) minus food and fuel, is sticky at around five per cent, even as the headline CPI has fallen below four per cent, well within the target of RBI. However, economists say uncertain monsoon can flare up prices and, therefore, the central bank would likely wait before deciding the way for rates to go. Meanwhile, the focus would be to continue to nudge banks to cut lending rates.

• 1:46 PM

  Special deposit facility: Economists expect creation of non-collateralised liquidity parking instrument in this policy

• 01:40 PM

  Economists say: uncertain monsoon can flare up prices. So RBI would likely wait before deciding the way for rates to go

• 01:34 PM

  Now that US Federal Reserve has signalled that at least two more rate hikes will ensue in 2017, market participants will look for RBI's take on the same.
    

01:03 PM

ALSO READ: RBI policy review: Amid focus on cash control, rate to remain unchanged

(READ MORE)