INSUBCONTINENT EXCLUSIVE:
Mumbai: The Reserve Bank of India (RBI) kept interest rates unchanged on Thursday as expected with price pressures remaining elevated
But the central bank also showed the range of liquidity tools at its disposal to fuel the flagging economy even if monetary policy is tied
to the inflation-targeting mandate.
It unveiled a series of measures including longer-term liquidity for banks and relaxed the cash reserve
requirement for loans to retail customers to give a fresh impetus to flagging loan demand and drum up consumption.
Governor Shaktikanta Das
walked the extra mile, promising easy liquidity and keeping the market well lubricated for accelerated loan growth and lower lending rates
despite declaring that inflationary pressures could keep a lid on interest rates
Committee (MPC) voted unanimously to keep the repo rate, at which it lends to banks, at 5.15per cent
All other rates were unchanged
through which it will lend as much as ?1 lakh crore to banks for periods of one and three years, which could improve the transmission of
from the central bank did not change, bond investors cheered by pushing down yields, especially at the shorter end of the tenor.
Yields on
four-year government bonds fell 17 basis points to 6.06per cent, while for 10-year debt it eased six basis points to 6.45per cent
Bond yields and prices move in opposite directions
A basis point is 0.01percentage point
Yields on three-year sovereign paper dipped 19 basis points.
The benchmark Sensex climbed 0.40 per cent to 41,306.03, and the rupee was a
tad higher on Thursday at 71.20 to the dollar versus 71.22 a day earlier.
BCCL - Non CopyrightTransmission ImprovedThe governor said rate
These developments should amplify effects of the cumulative policy rate cuts since February 2019 and pull up domestic demand going
It raised the Consumer Price Index (CPI) inflation projection to 6.5per cent for the fiscal fourth quarter from 5.1-4.7per cent projected
earlier for the second half
It is expected to fall to 3.2per cent in the December quarter next year
The RBI is mandated to curb inflation to 4per cent with a two percentage point margin on either side.
The RBI taking resort to liquidity
tools suggests that the growth slowdown is worsening with many of the indicators flashing red, including falling consumer
(OBICUS), fell to 69.1per cent in the second quarter from 73.6per cent in the quarter before that
A saving grace was the household inflation expectation, which has eased after surging sharply in the previous poll
The three-month-ahead inflation expectation fell 60 basis points and one-year-ahead expectation by 70 basis points.
Governor Das sent an
unequivocal message that growth remains the priority even if inflation is a dampener
