Repo Rate Current Affairs - 2019

Key RBI Policy Rates and Ratio – February, 2019
Current Bank Rate [What is Bank Rate?] 6.50%
Current Repo Rate [What is Repo Rate?] 6.25%
Current Reverse Repo Rate [What is Reverse Repo?] 6.00%
Current Marginal Standing Facility [What is MSF?] 6.50%
Current Cash Reserve Ratio [What is CRR?] 4%
Current Statutory Liquidity Ratio [What is SLR?] 19.25%
Last Updated on 07-02-2019

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WPI Inflation Hits 10-Month Low

The Union Ministry of Commerce and Industries has released the data on WPI Inflation. The data makes the following observations:

  • The WPI Inflation fell to a 10-month low of 2.76 per cent in January owing to softening prices of fuel and some food items.
  • The WPI inflation has stood at 3.8 per cent in December 2018, and 3.02 per cent in January 2018.
  • Manufactured products inflation which has a weightage of 64.23 per cent in WPI declined to 2.61 per cent in January, from a level of 2.96 per cent in January 2018.
  • The wholesale based price inflation for ‘fuel and power’ segment fell sharply to 1.85 per cent as against 8.38 per cent in December 2018, due to easing in prices of motor fuel and LPG.
  • The government also revised the November WPI downwards to 4.47% from 4.64% earlier.
  • The primary articles inflation with the weightage of 22.62 per cent increased to 3.54 per cent in January from 2.53 per cent in same month last year.

In its last monetary policy review, RBI had decreased the lending rate by 0.25 per cent. It is expected that the decrease in inflation may provide further head-room to the RBI to cut interest rate (repo) in the coming months.

Month: Categories: Business, Economy & Banking

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RBI Sixth bi-monthly Monetary Policy Statement 2018-19: Key Facts

The important facts related to the RBI’s sixth bi-monthly monetary policy statement for 2018-19 is listed below:

  • RBI has relaxed the CPI or retail inflation forecasts for India in FY20.
  • Because of the low inflation forecasts, RBI has decided to trim down policy repo rate by 25 basis points, taking the overall interest rate down to 6.25% now from previous 6.50%.
  • The policy stance has also been changed from calibrated tightening to neutral.
  • RBI data suggests that the 7th Pay Commission’s HRA allowance impact on the inflation indicator has diminished.
  • The reverse repo rate under the liquidity adjustment facility now stands adjusted to 6.0 per cent.
  • The marginal standing facility (MSF) rate and the Bank Rate now stand at 6.5 per cent.

Why the Inflation Forecasts were on the lower side?

The lower inflation forecasts by the RBI are attributed to the following reasons:

  • Food inflation has continued to be on the downside with continuing deflation across several items and a significant moderation in inflation in cereals. Food commodities are experiencing excess supply conditions domestically as well as internationally. Hence, the short-term outlook for food inflation appears particularly benign, despite adverse base effects.
  • The moderation in the fuel prices was larger than anticipated. Inflation in items of rural consumption such as firewood and chips, which had remained sticky and at elevated levels, has collapsed in recent months. Electricity prices have also witnessed an unexpected moderation. This resulted in a softer outlook for the fuel group
  • The recent unusual pick-up in the prices of health and education is seen as a one-off phenomenon.

The next meeting of the MPC for the policy review is scheduled from April 2 to 4, 2019.

Month: Categories: Business, Economy & BankingUPSC

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