The Reserve Bank chose for the
status-quo at the Wednesday policy review to "pause and
Even as the central bank lowered its inflation
forecast sharply to 2.7-3.2 percent for the second half of the
fiscal, it cited upside risks like food prices, impact of the
minimum support prices hikes on inflation, crude prices and
global financial markets.
"If the upside risks we have flagged do not
materialise or are muted in their impact in the incoming data,
there is a possibility of space opening up for commensurate
policy actions," Patel said, hinting a rate cut.
But many analysts and banks interpreted the tone of
the Governor and the MPC as indicating a long pause, and ruled
out any adverse action by the Mint Road at least for the next
Patel seemed to suggest that the status quo on the
rates and the stance was pending clarity on the data points.
"Given the assessment that growth will likely remain
healthy for the rest of the year, the MPC (monetary policy
committee) retained its stance at calibrated tightening so as
to buy time to pause, reflect and undertake future policy
actions with more robust inflation signals," he told reporters
at the post-policy customary presser.
The RBI retained its full-year growth forecast at 7.4
percent, though many analysts have lowered the same to 7.1-7.3
percent after the drastic fall in the second quarter numbers.
Deputy governor Viral Acharya said volatilities in dataprints
made the decision somewhat difficult.
He said even though the present numbers are lower, the
MPC projection is still showing inflation to be at 4.2
percent--above the medium term target of 4 percent -- for the
second quarter of the next fiscal.
"Recent dataprints have created massive uncertainties.
We really need sometime to assess the inflation outlook better
and then we will be able to take further policy action if
necessary," Acharya said.
Warning the Central and state governments against a
spending spree ahead of the polls, Patel warned that fiscal
slippage by both the states and the Centre will have an impact
on inflation prints.
In the fifth bi-monthly policy review, the RBI's rate
setting panel retained the repo rate at 6.5 per cent and as
also the stance.
It also kept the cash reserve ratio (CRR) unchanged at
help quickly push liquidity into the system.
Banks have to mandatorily keep 4 percent of their
total deposits with the central bank in the CRR window, and
earns no interest on this.
Even a half-a-percentage cut in the CRR would have
resulted in a good liquidity inflow as the system-wide
deposits stood at Rs 118.25 trillion for the week ending
November 9, according to the latest RBI data.
When asked about leaving the CRR unchanged, Patel said
this (CRR) does not come under the ambit of the MPC, and also
other alternatives which make us believe that a CRR cut will
not be needed now.
"We see no reason to use CRR when we've so many
instruments at our disposal...which we've implemented over the
past two months for liquidity management,and which are broadly
market-based with some incentives," he said.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)