RBI Monetary Policy Meet December 2017: The Reserve Bank of India is going to announce its fifth Bi-monthly Monetary Policy today, with economists saying that the central bank is going swing between neutral and hawkish stance given inflation concerns and most likely put the rate cut on hold. The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6% in August, bringing it to a 6-year low, however, kept it unchanged in October. The Consumer Price Index (CPI) for October had accelerated to a seven-month high of 3.5% from a year ago, even as a Reuter poll of 26 economists showed that there are expectations that inflation will breach its 4% target in the next few months. Besides inflation, higher oil prices and the impact of the seventh pay commission are also likely to play a role in RBI’s monetary policy decision.
Here are live updates from Fifth Bi-monthly Monetary Policy Statement for 2017-18:
1.59 pm: The monetary authority in October raised its inflation forecast to a range of 4.2 percent to 4.6 percent for October-March.
1.44 pm: EMIs unlikely to change as RBI may not cut interest rates.
1.36 pm: PMEAC member Surjit Bhalla said RBI’s Monetary Policy Committee (MPC) needs to work out its inflation model.
1.28 pm: RBI’s mid-quarter policy meet likely to add volatility in the market, HDFC Securities said.
1.26 pm: Uncertainty regarding the buoyancy of indirect tax collections post-GST, and the continued fiscal consolidation forecast by the rolling targets, may limit the fiscal space available to the government.
1.24 pm: Based on the expected gradual rise in currency with the public and continued working capital-led uptick in credit off-take, liquidity situation is likely to be close to neutral by mid-December, ICRA said.
1.20 pm: We expect the RBI to keep rates on hold this time and in February as well as the inflation is likely to remain high. The crude oil price is also hovering around $63 per barrel; the US oil price is also high,” Madhavi Arora, an economist at Kotak Institutional Equities told FE Online.
1.11 pm: Ahead of the monetary policy decision, 10-year bond yield touches 7.10%, last seen in September last year.
1.05 pm: The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation, Union Bank MD and CEO Rajkiran Rai G said.
1.03 pm: The banking sector stocks entered negative territory ahead of RBI monetary policy decision. SBI, HDFC Bank, ICICI Bank have lost up to 1.32% today.
1.01 pm: The RBI has fixed the reference rate of the rupee at 64.3764 against the US dollar and 76.3762 for the euro.
12.54 pm: The main source of RBI discomfort is that core inflation, which excludes food and energy prices, has remained stubbornly high at around 4.5%, say economists.
12.52 pm: The RBI has mopped up Rs. 90,000 crore through open market (OMO) bond sales between July and November.
12.37 pm: Pressure points for inflation are on the higher side but I don’t expect them to sound very hawkish given the fact that we expect goods and services tax (GST) rate cuts, Deepali Bhargava, Economist at Credit Suisse told CNBC TV18.
12.04 pm: Sensex and Nifty opened lower on Wednesday ahead of the monetary policy statement. BSE Sensex lost 101.24 points to mark the day’s low of 32,701.2 while NSE Nifty dropped 41.95 points to hit the day’s low at 10,076.3. The Indian rupee slipped 6 paise to 64.44 against the dollar at the interbank forex market.
12.03 pm: “Sometimes RBI must use rates to drive liquidity; sometimes it must use liquidity to drive rates; clearly now, the latter is called for,” Pronab Sen, former chief statistician told CNBC-TV18
11.51 am: By keeping rates high they have imposed a high output sacrifice, Ashima Goyal, a member of Prime Minister’s Economic Advisory Council told Bloomberg.
11.50 am: Our focus will be on the tone of the policy guidance, divided between a neutral or a hawkish bias.
11.45 am: Reuters poll said that “policymakers have little room for manoeuvre and the outlook for rates beyond the next few months is exceptionally fuzzy”.
11:44 am: We expect a hawkish hold from the RBI..and policy rates to remain unchanged through 2018, Nomura said.