RBI leaves policy rate unchanged: Top takeaways

The Reserve Bank of India on Thursday unexpectedly kept benchmark interest rates unchanged on concerns of headline inflation breaching its medium-term target, despite a worrying slowdown in the economy. After five consecutive cuts in interest rates this year, the six-member monetary policy committee (MPC) headed by RBI Governor Shaktikanta Das unanimously voted to hold the key repo rate at 5.15 per cent and reverse repo rate at 4.90 per cent.

Bankers and economists had widely expected the central bank to cut rates for a sixth time to support a slowing economy, whose growth rate slipped further to a six-year low of 4.5 per cent in the September quarter from 7 per cent a year back. The RBI reiterated it would maintain an accommodative stance as long as it is necessary to revive economic growth but cut its GDP growth forecast to 5 per cent for the 2019-20 fiscal year (April to March) from 6 per cent earlier estimate.

Here are the key takeaways from RBI Monetary Policy meet:

* Repo rate unchanged at 5.15%

* Reverse repo rate stays unchanged at 4.90%

* MSF, Bank Rate unchanged at 5.40%

* MPC unanimously votes for status quo on repo rate

* Based on CPI-GDP dynamics, MPC felt pause was appropriate

* MPC recognises "there is monetary policy space for future"

POLICY STANCE

* MPC to continue with accommodative stance

* MPC's accommodative stance "as long as it is necessary"

* MPC stance aimed to revive growth while ensuring CPI in band

INFLATION

* CPI projection raised to 4.7-5.1% Oct-Mar

* CPI projection raised to 3.8-4.0% Apr-Sep 2020

* Risks to inflation projections "broadly balanced"

* MPC sees inflation rising in near-term

* MPC sees CPI moderate below target by Jul-Sep 2020

* Need to carefully monitor fresh data for CPI outlook clarity

ECONOMY

* FY20 real GDP growth seen 5.0% from 6.1% set in Oct

* Oct-Mar GDP seen 4.9-5.5%

* Apr-Sep 2020 GDP seen 5.9-6.3%

* MPC notes economic activity has weakened further

* MPC sees govt, policy steps gradually feed into real economy

* Data showing some early signs of recovery in invest activity

* Need to see sustainability of investment activity recovery

* MPC sees need to address impediments holding back investment

* MPC sees external benchmarks strengthen monetary transmission

* Need greater flexibility in small savings rate adjustments

* See FY21 Budget provide insight into further steps by govt

* see FY21 Budget shed light on govt policy impact on growth

* MPC meeting minutes to be published on Dec 19

* Next MPC meeting to be held from Feb 4-6

* Delay in domestic demand revival downside risk for GDP

* Slower domestic demand reflecting in softening in CPI

* See price rise in milk, pulses, sugar sustaining

* Oct CPI print "was much higher than expected"

* FX reserves at $451.7 bln on Dec 3, up $38.8 bln from Mar 31

* Net disbursals of FX borrowings up $11.5 bln Apr-Oct

* Median bank term deposit rates down 47 bps Feb-Nov

* Bank deposit rate down by 9 bps Oct vs just 7 bps in Feb-Sep

(Inputs from Agencies)

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