RBI announced Fifth Bi-monthly monetary policy for Dec 2015

Published on Tuesday, December 01, 2015

On, 1st December, The Governor of the Reserve Bank of India Raghuram Rajan has announced the fifth bi-monthly monetary policy in which he kept rates unchanged due to insufficient impact of previous rates cut and various multiple factors. The repo rate has been unchanged due to the basis of
an assessment of the current and evolving macro-economic situation. In it's previous monetary policy, when the repo rate was cut by a larger than expected rate of 5.0 percent to 6.75 percent with an aimed to boost the economy and the spur demand.

However , it was expected that it would be unchanged because the bank yet need to fully translate the benefit of repo rate.the apex bank is likely to hit the pause button in its policy review with a 0.25 percent cut in February , a report by global services major Bank of America Merill Lynch said in its meeting.

“Fast changing geo-political situation in the Middle East and the increased terror threat with consequent economic costs will surely weigh on the RBI’s policy stance which is not expected to give any more cut in the interest rates in the ensuing review,” said the Associated Chambers of Commerce and Industry (Assocham) in a release

“Then the whole issue of rupee stability in the backdrop of chances that US Fed may raise the interest rates, would influence the monetary policy and the industry must be prepared for the unfolding events,” the industry chamber said in a pre-policy note.

“Given the ‘front-loaded’ rate cut in September 2015 and the incrementally modest transmission of past easing, the uncertainty related to the monsoon and efficacy of food management in 2016 and the impact of the impending pay revision for government employees pose key risks to the achievement of the RBI’s target of containing CPI inflation below 5 percent by Q4 FY17,” it added.

Consumer price-indexed (CPI) — or retail — inflation rose in October to 5 percent, which was a four-month high. Inflation, in September, was at 4.41 percent.

The government’s total outlay for paying salaries to its staff will rise by Rs.102,000 crore, which, if the Seventh Pay Commission recommendations are accepted in totality, will put pressure on its fiscal deficit control efforts.

Rabi crop output has been lower than expected, while prices of pulses have been rising, which are bound to put pressure on food inflation.

The RBI recently lowered its growth forecast for the country’s current fiscal to 7.4 percent, from the 7.6 percent it had projected earlier.

Current Rates Till Today

Bank Rate - 7.75%
Repo Rate - 6.75%
Marginal Standard Facility - 7.75%
Reverse Repo Rate - 5.75% 
Cash Reserve Ratio - 4%
SLR - 21.5%

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