INSUBCONTINENT EXCLUSIVE:
Going against consensus estimates, the Reserve Bank of India (RBI) on Friday's urprised markets, by maintaining status quo on policy rate
at the bimonthly policy review
The central bank cites benign outlook for price rise for its decision.
The Monetary Policy Committee (MPC) voted 5:1 in favour of a status
quo, with only Chetan Ghate voting for a 25 basis points rate hike.
However, the committee changed the stance to hawkish, to focus on
points hike in policy rate
Abhimanyu Sofat, Head of Research, IIFL Securities, said the RBI policy announcement of keeping rates unchanged is a surprise, this may lead
RBI Governor Urjit Patel said this stance clearly signals that a rate cut is off the table
its confidence on benign inflation, which in turn, stems from the softening of food prices
pressure on financial markets, as the decision came against expectations
However, it will not change your monthly loan instalments
real estate stakeholders at large
However, the economy is too precariously poised for real estate to pull itself by its bootstraps
It expects economic growth to accelerate to 7.6 per cent in FY20.
RBI focussed on inflation target The MPC reiterated its commitment to
achieving the medium-term target for headline inflation of 4 per cent on a durable basis
themThe MPC noted that global headwinds in the form of escalating trade tensions, volatile and rising oil prices and tightening global
financial conditions pose substantial risks to the growth and inflation outlook
It is, therefore, imperative to further strengthen domestic macroeconomic fundamentals, it said..
Outlook on crude, gold base metalsGrowth
in global trade is weakening as reflected in export orders and automobile production and sales
Crude oil prices eased during the first half of August amid concerns of reduced demand from emerging markets economies due mainly to the
spillover from country-specific turmoil and accentuated by rising supplies
However, prices rebounded on expectation of reduced supplies due to sanctions on Iran and falling US stockpiles
Base metal prices witnessed selling pressure in anticipation of weak demand from major economies
Gold prices continued to slide lower on a strong US dollar, though they recovered somewhat on safe haven demand from the mid-August lows
Global economy as viewed by MPCSince the last MPC meeting in August 2018, global economic activity has remained resilient in spite of
ongoing trade tensions, but is becoming uneven and the outlook is clouded by several uncertainties, RBI said
The central bank further said among the advanced economies, the US appeared to have sustained pace in Q3 of 2018 as reflected in strong
retail sales and robust industrial activity
In the euro area, economic activity remained subdued due to overall weak economic sentiment, weighed down mainly by political uncertainty
The Japanese economy has so far maintained the momentum of the previous quarter, buoyed by recovering industrial production and strong
business optimism.
View on financial marketsGlobal financial markets continued to be affected by monetary policy stances in major advanced
economies (AE), the spreading of contagion risks from specific emerging market economies (EME), and geopolitical developments
Among advanced economies, equity markets in the US touched a new high, driven by technology stocks, while in Japan, they were boosted by the
In contrast, stock markets in the Euro area suffered losses on signs of a slowdown and budget concerns in some member states
Sharp sell-offs have occurred on waning appetite of foreign portfolio investors for EME equities.
