RBI Policy Monetary Policy Committee Decision

BE/RBI/17/2017

RBI policy Monetary Policy Committee decision

Salient Features of the meeting are:

• MPC leaves rates unchanged, lowers inflation forecast
• MPC decides to leave repo rate unchanged and lower its inflation forecast.
• SLR has been brought down by 50 basis points with no change in HTM.
• Thus, the forecast on inflation was also lowered, due to lower inflation numbers for April.
• Market participants perceived the policy to go for a rate cut, than the previous one
• There was an appreciation after the announcement in both  bonds and rupee values, and the 10 year benchmark bond yield traded below at 6.57 per cent and the rupee value stood at 634.34 per dollar.

Now let us see, as to what the experts feel about this announcement?

1. The probability of a rate cut in August has definitely gone up.
2. Dealers feel that bond yield could fall more particularly because of rate cut interpretation of the policy statement.
3. Analysts expect bond yields would steady between 6.50 percent and 6.70 percent post monetary-policy announcement.
4. There is a possibility of the interest rate on High value Home Loans of over Rs. 75 lacs to come down.
5. Some feel that this decision may not have any binding on the forthcoming Monetary Policy in August 2016 and there is little chances of rates being cut in August this year.

What does RBI comment about the MPC decision?

• The MPC has received inputs on the effects of demonetization relating to the price formations, on food items which are tagged with excess supplies, more so to fruits and vegetables, pulses and cereals.
• It should be carefully watched as to whether the unusual low momentum in the inflation side is under tolerance level. The GVA (Gross value Added) growth for 2017-18 has been revised by 10 bps, downwards, from April this year, which stands at 7.3 per cent.