‘’Have many instruments at our disposal to address the slowdown,” RBI Guv Das says after keeping the repo rate unchanged.

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The Reserve Bank of India (RBI) has  kept repo rate unchanged at 5.15 per cent . Disclosing this, Governor Shaktikanta Das at the RBI’s sixth bi-monthly Monetary Policy Review meet of 2019-20  in Mumbai, said the central bank revised upwards its retail inflation projection for the last quarter of the current fiscal to 6.5 per cent due to likely increase in input costs for milk and pulses amid volatile crude oil prices Inflation outlook is likely to be influenced by several factors like food inflation, crude prices and input costs for services, he said. On food inflation, RBI said it is likely to soften from the high levels registered in December and the decline is expected to become more pronounced during the fourth quarter of this fiscal as onion prices ease following arrivals of late kharif and rabi harvests, the Reserve Bank of India (RBI) said. Crude prices are likely to remain volatile due to unabated geo-political tensions in the Middle East on one hand, and uncertain global economic outlook on the other. Moreover, there has been an increase in input costs for services, in recent months, RBI added. “Taking into consideration these factors, and under the assumption of a normal south west monsoon in 2020-21, the CPI inflation projection is revised upwards to 6.5 per cent for Q4:2019-20 (January-March 2020); 5.4-5 per cent for H1:2020-21 (April-September 2020); and 3.2 per cent for Q3:2020-21 (October-December), with risks broadly balanced,” RBI said. Consequently, the reverse repo rate stands unchanged at 4.90 per cent. the bank said it will maintain ‘accommodative’ policy stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target. The committee voted 6-0 in favour of the status quo of the interest rates. GDP growth forecast for the financial year 2020-21 (FY21) is projected at 6 per cent and in the range of 5.5-6.0 per cent in the first half of the next fiscal and 6.2 per cent in Q3 (October-December period). GDP growth for FY 2019-20 is seen at 5.0 per cent.The CPI inflation projection has been revised upwards to 6.5 per cent for Q4:2019-20; 5.4-5.0 per cent for H1:2020-21; and 3.2 per cent for Q3:2020-21, MPC said in its release. The MPC noted that inflation surged above the upper tolerance band around the target in December 2019, primarily on the back of the unusual spike in onion prices. However, going ahead onion prices are likely to ease on the improvement in supply conditions. “Going forward, the trajectory of inflation excluding food and fuel needs to be carefully monitored as the pass-through of remaining revisions in mobile phone charges, the increase in prices of drugs and pharmaceuticals and the impact of new emission norms play out and feed into inflation formation,” the statement added. Accordingly, the MPC will remain vigilant about the potential generalisation of inflationary pressures as several of the underlying factors cited earlier appear to be operating in concert.  Shaktikanta Das said that the repeat of status quo should not be seen as an indicator of future action adding that economy remains weak and the output gap is negative. Transmission to credit markets are improving gradually and monetary transmission should help boost demand. “Have many instruments at our disposal to address the slowdown,” Das added. Meanwhile, the RBI announced that the CRR (Cash reserve ratio) will fall for every incremental loan given. CRR leeway on new consumer loans will be applicable till July 31.

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