RBI releases Third Bi-monthly Monetary Policy Statement 2017-18

Aug 3, 2017 14:21 IST

The Reserve Bank of India (RBI) on 2 August 2017 released the Third Bi-monthly Monetary Policy Statement 2017-18.

After assessing the current and evolving macroeconomic situation in the economy, the Monetary Policy Committee (MPC) decided to reduce the policy Repo Rate under the Liquidity Adjustment Facility (LAF) by 25 basis points to 6.0 per cent with immediate effect.

CA eBook

Consequently, the Reverse Repo Rate, the rate at which RBI borrows from bank under the LAF, now  stands at 5.75 percent. The Marginal Standing Facility (MSF) rate and the Bank Rate were fixed at 6.25 per cent each. This is the first rate cut since October 2016.

The decision of the MPC is consistent 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.

Highlights of the Policy Statement
Some of the upside risks such as high core inflation (excluding food and fuel prices), poor rains and adverse impact from the rollout of the Goods and Services Tax (GST) have not shown up yet, opening up space for monetary policy accommodation.

Retail prices rose to 1.5 per cent in June, which is lower than RBI’s April-September inflation forecast of 2 to 3.5 per cent. Inflation slowed mainly because of falling food prices and the base effect.

The retail inflation, led by softer food prices, fell to a more than five-year low in June 2017.

The economic growth forecast was retained at 7.3 per cent amid prospects of a better harvest even though the industrial sector continues to struggle.

 

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