Terminal rate, policy tone may be in focus | Current Affairs | Vision IAS

Daily News Summary

Get concise and efficient summaries of key articles from prominent newspapers. Our daily news digest ensures quick reading and easy understanding, helping you stay informed about important events and developments without spending hours going through full articles. Perfect for focused and timely updates.

News Summary

Sun Mon Tue Wed Thu Fri Sat

Terminal rate, policy tone may be in focus

2 min read

Monetary Policy Committee (MPC) Meeting Overview

With the Reserve Bank of India (RBI) preparing for its upcoming monetary policy committee (MPC) meeting, key focuses include the policy tone and hints about future interest rate reductions amidst current growth-inflation dynamics.

Interest Rate Projections

  • The MPC had previously reduced the policy repo rate by 25 basis points in both February and April meetings.
  • Another 25 basis point rate cut is anticipated, potentially settling the terminal rate at 5.5 per cent.
  • Despite higher-than-expected GDP growth of 7.4% for January-March, the RBI maintains a GDP growth projection of 6.5 per cent for the fiscal year.

Economic Outlook and Policy Stance

  • RBI's stance is likely to remain "accommodative," focusing on easing inflation rather than growth concerns.
  • April's policy review was notably dovish, with assurances of maintaining adequate liquidity in banking to aid in policy rate transmission.
  • The committee aims to retain flexibility for timing future moves, avoiding signals beyond maintaining or cutting rates.

Liquidity and Open Market Operations (OMOs)

  • With a substantial RBI surplus transfer to the government, additional OMOs are unlikely in the financial year's first half due to muted loan demand.
  • Expectations for OMOs are primarily in the second half, with a scope of ₹1.6 trillion, as additional liquidity measures are currently deemed unnecessary.

Overall, the MPC meeting is expected to continue with an accommodative approach, focusing on inflation management while maintaining flexibility for future rate adjustments.

  • Tags :
  • Liquidity
  • OMOs
Subscribe for Premium Features