New Delhi: RBI MID QUARTER POLICY
Ø RBI leaves Repo rate unchanged at 8%
Ø RBI leaves CRR unchanged at 4.75%
Ø RBI had front loaded rate reduction in April with 50bp cut
RBI GUIDANCE
“Future action to depend on external and domestic developments that contribute to lowering inflation risks.”
Ø Evolving growth-inflation dynamic will continue to influence rate stance
Ø Core inflation has moderated but headline and retail inflation rising
Ø High headline, retail inflation has a bearing on inflation expectations
Ø RBI will continue to use OMOs to tackle liquidity pressures
Ø RBI to respond rapidly and appropriately to adverse global developments
RBI ON GROWTH
Ø Role of interest rates relatively small in current slowdown
Ø Further reduction in rates will increase inflation pressures rather than support growth
Ø Pace of expansion has slowed moderately
Ø Must assess to what extent high rates are affecting growth
Ø Real effective bank lending rates lower than In 2003-08
Ø Rupee weakness to act as a stimulus to external demand
RBI ON INFLATION
Ø Persistence of inflation at wholesale and retail level
Ø Core inflation has trended lower
Ø Incomplete pass-through of global crude prices not allowing aggregate demand to adjust
Ø Wide CAD reflects demand-supply imbalances
Ø RBI leaves Repo rate unchanged at 8%
Ø RBI leaves CRR unchanged at 4.75%
Ø RBI had front loaded rate reduction in April with 50bp cut
RBI GUIDANCE
“Future action to depend on external and domestic developments that contribute to lowering inflation risks.”
Ø Evolving growth-inflation dynamic will continue to influence rate stance
Ø Core inflation has moderated but headline and retail inflation rising
Ø High headline, retail inflation has a bearing on inflation expectations
Ø RBI will continue to use OMOs to tackle liquidity pressures
Ø RBI to respond rapidly and appropriately to adverse global developments
RBI ON GROWTH
Ø Role of interest rates relatively small in current slowdown
Ø Further reduction in rates will increase inflation pressures rather than support growth
Ø Pace of expansion has slowed moderately
Ø Must assess to what extent high rates are affecting growth
Ø Real effective bank lending rates lower than In 2003-08
Ø Rupee weakness to act as a stimulus to external demand
RBI ON INFLATION
Ø Persistence of inflation at wholesale and retail level
Ø Core inflation has trended lower
Ø Incomplete pass-through of global crude prices not allowing aggregate demand to adjust
Ø Wide CAD reflects demand-supply imbalances
