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RBI MPC minutes reiterate need for frontloaded actions: Kotak Securities report
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SME Times News Bureau | 19 May, 2022
Members of the the Reserve Bank of India's Monetary Policy Committee
(MPC) highlighted concerns of spillovers from global inflation emanating
from ongoing geopolitical conflicts and supply-side disruptions,
besides acknowledging the need for reasonable policy actions to tame
inflation, said brokerage house Kotak Securities in a report.
The
minutes reinforced the necessity to frontload withdrawal of policy
accommodation amid increasing risk of inflation expectations getting
unanchored.
"While in all likelihood the April inflation reading
of 7.79 per cent may have been the peak, the descent is expected to be
very slow with all prints remaining above 6 per cent at least for the
rest of CY2022," the report said.
The persistence of elevated
commodity prices amid supply-chain strains and geopolitical tensions is
gradually making inflation more generalised and the risks have been
adequately acknowledged in the MPC minutes of May meeting.
Even
as the brokerage retains the base case repo rate hike of 40 basis points
along with a 50 basis points hike in Cash Reserve Ratio (CRR) in the
upcoming June policy, however, it cannot rule out an outside chance of
50 basis points hike given the need towards the conventional moves of
multiples of 25 basis points.
In minutes of the recent policy
meeting, MPC members highlighted the persistence of elevated inflation
emanating from supply disruptions caused by the Russia-Ukraine war and
Covid lockdowns in China as key risks.
They also acknowledged
that though inflation was mainly supply-led, monetary policy action was
necessary to avoid de-anchoring inflation expectations.
RBI
Governor Shaktikanta Das noted that the worsening inflation outlook
"warrants timely action to forestall second round effects which could
lead to un-anchoring of inflation expectations".
However, the MPC
members expressed a sense of ease compared to earlier policies from the
steadily improving growth scenario in the economy.
Das
highlighted that the rebound in domestic activity was getting gradually
generalised. Additionally, he also noted that monetary policy actions
aimed at lowering inflation and anchoring inflation expectations should
help strengthen medium-term growth, the brokerage said quoting the
minutes documents.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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