RBI maintains status quo keeps key policy rates unchanged

MUMBAI: The Reserve Bank of India on Wednesday today kept the key policy rates unchanged and said that it will wait for more incoming data to have a greater clarity on future monetary policy setting. ET highlights important statements released by the banking regulator.

POLICY STANCE
The regulator downplayed the recent fall in the economic growth numbers and said that a premature action at this stage risks disruptive policy reversals later and the loss of credibility for the institution. The central bank had recently changed its policy stance from accommodative to neutral and said that it would be ready to act in either direction. Accordingly, the MPC decided to keep the policy rate unchanged with a neutral stance and remain watchful of incoming data

INFLATION
The regulator while noting that inflation has fallen below 4 per cent only since November 2016 reiterated that the Monetary Policy Committee remained focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis. The regulator noted that if inflation stays its current course then headline inflation is projected in the range of 2.0-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half, which is lower than regulator’s last inflation projections.



GROWTH
The regulator said that the continuing remonetisation should enable a pick-up in discretionary consumer spending, especially in cash-intensive segments of the economy. Furthermore, the reductions in banks’ lending rates post-demonetisation would also support both consumption and investment demand of households and stress-free corporates.

"The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks," RBI said.

"Monetary policy can play a more effective role only when these factors are in place."