RBI has announced Second Bi-monthly Monetary Policy Statement 2016-2017

Reserve Bank of India Governor Raghuram Rajan has announced the Second Bi-monthly Monetary Policy Statement for the year 2016-17 in Mumbai. The central bank's decision to maintain status quo is the step to see the impact of delayed monsoon rainsHe further said, rising crude prices and implementation of 7th pay commission pose upside risk to inflation. On changing the policy rate, Mr. Rajan said the RBI will remain accommodative provided data are supportive. RBI has retained growth projection at 7.6 per cent for 2016-17 citing corporate profits and surge in consumption.

So accordingly, Mr. Rajan, keeps repo rate unchanged at 6.5%, reverse repo rate stays at 6.00 %, and CRR remains at 4%. While, LAF will also remain unchanged at 6.0 %, and the MSF rate and the Bank Rate at 7.0 %

Earlier, RBI had cut the repo rate by 0.25 % to 6.5 % in April in its first bi-monthly monetary policy review of the current financial year. But the inflation surprise in the April reading makes the future trajectory of inflation somewhat more uncertain.

Explaining the rationale for keeping the rates unchanged, Rajan said: "Incoming data since the April policy announcement show a sharper-than-anticipated upsurge in inflationary pressures emanating from a number of food items (beyond seasonal effects), as well as a reversal in commodity prices.

At present, Retail inflation rose to 5.39 % in April on higher food prices, reversing a downward trend seen in recent months. It was above RBI's near-term target of 5% by March 2017. However, latest official data showed India was one of the world's fastest growing economies in the March quarter, with GDP growing at a rate of 7.9 %. 

Courtesy : RBI.org

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