The Indian Panorama

Tag: MPC

  • Global uncertainty makes fight against inflation tough: RBI

    Majority of members of the high-powered Monetary Policy Committee (MPC) of the Reserve Bank were concerned about heightened inflation even as two panellists raised objections against an increase in the benchmark interest rate, according to the minutes of the meeting released on Wednesday.

    Following the recommendations of the MPC, the RBI increased the rate by 25 basis points on February 8, taking the repo rate to 6.5%. It was the sixth straight hike since May 2022.

    “The fight against inflation is complicated by the global outlook. There is some consensus growing around a milder slowdown than earlier feared, although geographical disparities complicate the prognosis. Be that as it may, the outlook for global inflation is turning more uncertain than before,” Patra opined as per minutes of the Monetary Policy Committee (MPC). Reserve Bank Governor Shaktikanta Das, who heads the six-member MPC, also said overall, there is considerable uncertainty at this stage on the evolving inflation trajectory due to ongoing geopolitical tensions, global financial market volatility, rising non-oil commodity prices, volatile crude oil prices and also weather-related events.

    He also said a 25 basis points rate increase provides space to calibrate future monetary policy actions and stances based on evolving macroeconomic conditions.

    The six-member MPC comprises three RBI officials — Governor Shaktikanta Das, Deputy Governor Michael Debabrata Patra, and Executive Director Rajiv Ranjan; and three government-nominated external members — Shashanka Bhide, Ashima Goyal and Jayanth R Varma.

    Source: PTI

  • RBI hikes interest rates, projects moderate inflation, growth in next fiscal

    RBI hikes interest rates, projects moderate inflation, growth in next fiscal

    London (TIP)- The Reserve Bank of India hiked the repo rate by 25 per cent to 6.5 per cent and forecast slower economic growth of 6.4 per cent during next fiscal as compared to the estimation of 7 per cent during the current fiscal year. The Union Budget pegs the actual growth rate for 2023-24 at a marginally higher 6.5 per cent and the Economic Survey estimates the real growth rate to be between 6 and 6.8 per cent.

    Announcing the bi-monthly monetary policy in Mumbai on Wednesday, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) decided on a sixth successive hike in the repo rate, or the interest rate at which the Central Bank lends to banks, by a 4:2 split decision.

    Faced with finding a balance between hiking interest rates to check inflation and not affecting industry’s growth, Das justified the hike on the basis of the RBI’s internal surveys which said manufacturing, services and infrastructure sector firms are optimistic of the business outlook.

    “Emerging market economies are facing sharp trade-offs between supporting economic activity and controlling inflation while preserving policy credibility,” said Das in this respect. The repo rate at 6.5 per cent still trails the pre-pandemic level and core inflation (manufacturing) remains sticky, he added.

    Growth during 2023-24 would, however, be weighed down by geo-political tensions and tightening global financial condition, Das cautioned.

    The MPC resolved to keep a close watch on inflation, which will remain above the comfort band of 6 per cent during the current fiscal but moderate to 5.3 per cent during the next fiscal.

    Quarterly inflation rates will decline to 5.7 during the ongoing fourth quarter of 2022-23 and further to 5 per cent, 5.4 per cent, 5.4 per cent and 5.6 per cent during the four quarters of 23-24. Quarterly GDP growth rates are projected at 7.8 per cent, 6.2 per cent, 6 per cent and 5.8 per cent during the four quarters of 2023-24.

    After the repo rate hike, the standing deposit facility (SDF) rate has been adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.

    Das said it is now proposed to permit all inbound travellers to use UPI payments for their merchant payments while they are in India. To begin with, the facility will be extended to travellers from G20 countries arriving at select international airports.

    The RBI Governor also announced a new facility, the ability to use UPI at coin-vending machines instead of tendering physical bank notes. “These vending machines will dispense coins against debit to the customer’s account using UPI instead of physical tendering of bank notes. This will enhance the ease of accessibility to coins,” he said.               Source: TNS

  • Retail inflation stays below 6% for 2nd month

    New Delhi (TIP)- Continuing moderation in food prices brought retail inflation to a 12-month low of 5.7% in December 2022 , data released by the National Statistical Office (NSO) showed. In another set of statistics released by NSO, industrial activity posted a sharp jump to 7.1% growth in the month of November. The latest Consumer Price Index (CPI) and Index of Industrial Production (IIP) numbers have positively surprised analysts. A Bloomberg forecast of economists had projected December inflation to be 7.9% while November IIP was expected to be just 2.8%. To be sure, experts are more sceptical about the prospects of a manufacturing revival than the downward trend in inflation, which makes the February Monetary Policy Committee (MPC) meeting of the RBI an important event in the economic calendar. Indeed, some economists are already recommending that the central bank suspend its rate tightening cycle in February.

    “Against the evolving landscape, we see little incentive for further rate hike, with synchronised past actions on rate front yet to show the full impact. The next policy statement is due on Feb 6-8 and just comes after the Union budget on Feb 1 and also after the FOMC policy statement on Jan 31-1, first in 2023, giving impetus to data driven stance,” said Dr Soumya Kanti Ghosh, group chief economic adviser, State Bank of India. India’s benchmark inflation rate, as measured by CPI stood at 5.72% in December 2022. This is the lowest monthly inflation print since December 2021, the third consecutive month of a dip, and the second consecutive month when it has stayed below the 6% mark, the upper limit of RBI’s tolerance band. The data also shows that inflation for the quarter ending December is just 6.1%, which is lower than the 6.6% forecast by MPC in its December 2022 meeting. MPC had overestimated inflation in the immediate quarter in its June and September meeting as well.     Source: HT