Tuesday, 25 September, 2018

RBI to payment system operators

Monetary policy: RBI lowers inflation target for first half of FY19 RBI keeps repo rate unchanged at 6 percent, stance stays at 'neutral'
Cristina Norman | 06 April, 2018, 04:21

Consequently, the repo rate remains unchanged at 6 per cent.

"The MPC chose to keep the policy repo rate on hold and continue with the neutral stance".

Noting that the February retail inflation turned out "softer" than RBI's earlier projection mainly owing to the "seasonal softening" in vegetable prices, Patel said that several uncertainties continue to surround "the baseline inflation path".

While the decision of the central bank's monetary policy committee (MPC) in the first bi-monthly monetary policy statement for fiscal 2019 has been along expected lines, there is a clear admission in the policy statement that inflation no longer poses a serious macro risk.

This is a comfortable scenario for RBI while the only itch is of the crude oil which was pegged at $55 is now pegged at $68 and there is a potential risk to the Inflation. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4% on a durable basis. Positives like a cooling down in CPI inflation to 4.4 per cent for February had led to speculation over RBI's rate call.

In an order today, the RBI instructed all banks and other regulated payment bodies (such as online wallets) to stop providing service to anyone who deals with cryptocurrencies, be it an organization or be it an individual.

The MPC said it saw inflation in the second half of this fiscal year at 4.4, but that was without taking into account any increase from higher housing allowances to government employees.

Patel added that the aggregate demand is expected to strengthen this year.

The central bank also expects the GDP (gross domestic product) growth to strengthen to 7.4 per cent in 2018-19, versus 6.6 per cent last fiscal.

On the downside, the central bank noted that "rising trade protectionism and financial market volatility could derail the ongoing global recovery".

This is the fourth time, when the RBI maintained status quo on repo rate at six per cent, which is lowest in over seven years, since November 2010.

Separately, the RBI said it has set up an inter-departmental group to study the "desirability and feasibility" of introducing a central bank digital currency.

According to the Indian business newspaper Financial Express, RBI Deputy Governor BP Kanungo told reporters on Thursday that the "specified time" would be three months.

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