Second bi-monthly Monetary Policy: Highlights

2019 ias preliminary exam test series

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

Main Highlights:

Repo rate unchanged at 6.25%,

Reverse repo unchanged at 6%

Statutory Liquidity Ratio cut by 0.5% to 20%

Growth forecast for 2017—18 lowered to 7.3% from 7.4%

Inflation projected at 2—3.5% for H1, 3.5—4.5% H2, FY18

GST roll out not to have material impact on inflation

Farm loan waivers risk fiscal slippages and inflationary spillovers

7th Pay Commission allowances, geo political, financial risk pose upside risk to inflation

Need to revive private investment, restore banking sector health, remove infrastructure bottleneck

RBI to work with government to address stress in bank balance sheet

Next meeting of Monetary Policy Committee on August 1 and 2

Current Affairs for IAS Exam