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All monetary policy panel members expect inflation to soften
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SME Times News Bureau | 19 Oct, 2016
Apart from the unanimity among them in cutting short-term interest rates
by 25 basis points, all the members of the Monetary Policy Committee
also felt inflation will soften thanks to good monsoon rains, along with
signs of an economic revival.
The minutes of their meeting of
October 3-4, released on Tuesday, suggest the members also felt the rate
cut was consistent with an accommodative stance of the policy to keep
retail inflation within a band of 4 per cent, plus or minus two
percentage points, while supporting growth.
"The committee
expects the strong improvement in sowing, along with supply management
measures, will improve the food inflation outlook," as per the minutes
of the meeting.
"It notes that the sharp drop in inflation
reflects a downward shift in the momentum of food inflation -- which
holds the key to future inflation outcomes -- rather than merely the
statistical effects of a favourable base effect," it said.
"The
momentum of growth is expected to quicken with a normal monsoon raising
agricultural growth and rural demand, as well as by the stimulus to the
urban consumption spending from the pay commission's award," it added.
"The
accommodative stance of monetary policy and comfortable liquidity
conditions should support a revival of credit to the productive
sectors."
The six-member committee has Reserve Bank of India
(RBI) Governor Urjit Patel as chairman and the central bank's Deputy
Governor R. Gandhi and Executive Director Michael Patra, as the
institution's representatives.
The three outside experts are:
Chetan Ghate, Professor at Indian Statistical Institute; Pami Dua,
Director at the Delhi School of Economics; and Ravindra Dholakia,
Professor at the Indian Institute of Management, Ahmedabad.
The
committee, during its first meeting, cut a key lending rate by 25 basis
points, bringing much relief to commercial banks and India Inc.
With
that decision, the repurchase rate, or the short-term lending rate
charged by the central bank on borrowings by commercial banks, was
lowered to 6.25 per cent, while the reverse repurchase rate
automatically stood adjusted to 5.75 per cent.
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As on 13 Aug, 2022 |
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