The Reserve Bank of India (RBI) has released the Fifth Bi-monthly Monetary Policy Statement, 2018-19 on Dec 05, 2018. The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) has decided to hold the key policy rate at 6.5% in the fifth bimonthly policy review. RBI maintained caliberated tightening stance and projected HIFY20 GDP growth at 7.5 per cent.
The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) in its ‘Fifth Bi-monthly Monetary Policy Statement, 2018-19’ on Dec 05 has decided to hold the key policy rate at 6.5% in the fifth bimonthly policy review. RBI maintained caliberated tightening stance and projected HIFY20 GDP growth at 7.5 per cent. The reverse repo rate is at 6.25 per cent.
While the decision on keeping the policy rate unchanged was unanimous, Dr. Ravindra H. Dholakia voted to change the stance to neutral. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis.
Inflation is projected at 2.7-3.2 per cent in H2:2018-19 and 3.8-4.2 per cent in H1:2019-20, with risks tilted to the upside. The projected inflation path remains unchanged after adjusting for the HRA impact of central government employees as this impact dissipates completely from December 2018 onwards.
GDP growth for 2018-19 has been projected at 7.4 per cent (7.2-7.3 per cent in H2) as in the October policy, and for H1:2019-20 at 7.5 per cent, with risks somewhat to the downside (Chart 2).
The next meeting of the MPC is scheduled from February 5 to 7, 2019.
Monetary and Liquidity Measures
On the basis of an assessment of the current and evolving macroeconomic situation at its meeting on Dec 05, the Monetary Policy Committee (MPC) decided to:
- keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent.
Consequently, the reverse repo rate under the LAF remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.