RBI holds rates, but hints at future easing

Date posted: Thursday 6 December 2018

The Reserve Bank of India left interest rates and monetary policy stance unchanged but lowered retail price forecast, kindling hopes of a rate cut if inflation stays benign. It may be months before the monetary policy committee (MPC) actually cuts rates and RBI governor Urjit Patel said it is not changing the monetary policy stance of ‘calibrated tightening’ since growth is expected to remain healthy for the rest of the year. The central bank lowered inflation forecast for the second straight time, projecting a rate of 2.7-3.2 per cent in the second half, from the 3.9-4.5 per cent forecast during the previous policy meet. The central bank also ruled out any special liquidity window for non-banking finance companies, saying the liquidity situation has been managed to reflect normal market conditions. However, the regulator promised to act if the situation goes out of hand, which appears remote at this point. RBI also announced a road map for lowering statutory liquidity ratio by 150 basis points with a 25-basis points cut every quarter, a move that would make more than Rs 1 lakh crore of funds available for lending.

(Economic Times)