#NewDelhi : According to finance analysts’ estimates, the Reserve Bank of India refrained from lowering policy rates in its second bi-monthly monetary policy meet on Tuesday. The central bank retained the repo or the repurchase rate at 6.50% on the back of higher food inflation and amid expectations of a rate action by the US Federal Reserve. Since the rate-easing cycle began in January 2015, the RBI has reduced policy rates by 150 basis points.
The Reserve Bank continued to maintain an accommodative stance and said if all goes well and there is a fall in food inflation, the RBI will be willing to lower rates further.
Analysts expect the RBI Governor to lower rates on August 9, after getting a clearer picture on monsoon. With predictions of above normal rainfall, Rajan may also not have to worry about RBI’s FY17 growth guidance of 7.6%. India’s GDP grew at 7.9% in the fourth quarter of FY16 and full-year growth came in at 7.6%.
The move or the lack of it was largely expected with CPI, or consumer price inflation, coming in at a higher 5.4% in April from 4.8% in March, primarily on the back of food inflation. Wholesale price index, or WPI, too came in at 0.3% in April, after being in the negative territory for 17 consecutive months, though this may not have been a deciding factor for the RBI.
Added to this, the market was expecting the US Federal Reserve to raise rates during its June 14-15 meeting. However, Friday’s weaker-than-expected jobs data (US) may result in Janet Yellen not raising rates until further indication that the US economy can remain or stay on track.
Policy Action
Date and Year Quantum fall Final repo rate
15-Jan-15 25 basis points 7.75%
3-Feb-15 Unchanged 7.75%
7-Apr-15 25 basis points 7.50%
2-Jun-15 25 basis points 7.25%
4-Aug-15 Unchanged 7.25%
29-Sep-15 50 basis points 6.75%
1-Dec-15 Unchanged 6.75%
2-Feb-16 Unchanged 6.75%
5-Apr-16 50 basis points 6.50%
6-Jun-16 Unchanged 6.50%
CPI Inflation
Month and year CPI Rate
Dec-14 4.28%
Jan-15 5.11%
Feb-15 5.37%
Mar-15 5.17%
Apr-15 4.87%
May-15 5.01%
Jun-15 5.40%
Jul-15 3.69%
Aug-15 3.75%
Sep-15 4.41%
Oct-15 5%
Nov-15 5.41%
Dec-15 5.61%
Jan-16 5.69%
Feb-16 5.26%
Mar-16 4.83%
Apr-16 5.39%
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