First Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

The Monetary Policy Committee (MPC) met on 4th April 2019 and has issued the First Bi-Monthly Monetary Policy Statement- Resolution for the year 2019-20.

The Reserve Bank of India (RBI) on Thurday carried out a second successive interest rate cut in a span of two months while maintaining a neutral monetary policy stance, reflecting the central bank’s concerns about sluggish economic growth in India and abroad. On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to:

  • reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.0 per cent from 6.25 per cent with immediate effect.

Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.

The MPC also decided to maintain the neutral monetary policy stance.

These decisions are 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.

The central bank’s first bimonthly policy statement for 2019-20 stated unambiguously, “The need is to strengthen domestic growth impulses by spurring private investment, which has remained sluggish."

The following are the Highlights of the First Bi-Monthly Monetary Policy Statement for 2019-20:

  •  RBI cut the repo rate by 25 basis points to 6 percent. Last time repo rate stood at 6 per cent was in April 2018. Consequently, the reverse repo rate adjusted to 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 percent.
  • Revised CPI inflation forecast downwards to 2.4 percent in Q4 of FY19, 2.9 percent-3.0 percent in H1 of FY20 and 3.5 percent-3.8 percent in H2:2019 20.
  •  Lowered the GDP growth forecast for FY19 to 7.2 percent from earlier 7.4 percent. GDP growth for 1H of FY20 in the range of 6.8-7.1 percent and 7.3-7.4 percent in 2H.
  •  The MPC also decided to maintain the neutral monetary policy stance.
  •  Allowed additional 2% of SLR to be recognised in liquidity coverage ratio
  •  MPC voted 4:2 in favour of a rate cut; 5:1 in favour of maintaining stance at neutral
  • The minutes of the MPC’s meeting will be published on April 18.
  • The next meeting of the MPC will be held during June 3, 4 and 6.
  • Please click on the following link to read the full Statement First Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

    Source: rbi.org.in, Business Line, LiveMint

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