Note

INSTANT VIEW-India cenbank holds rates at record lows amid concerns over rising COVID-19 cases

Verified Media
· Views 43

April 7 (Reuters) - The Reserve Bank of India (RBI) kept interest rates steady at record lows on Wednesday, as widely expected, sticking to its accommodative monetary policy amid concerns that rising COVID-19 infections could derail the country’s nascent economic recovery.

The RBI kept the repo rate or its key lending rate steady at 4%, while the reverse repo rate or its borrowing rate was left unchanged at 3.35%.

India’s central bank has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the pandemic. This follows 135 bps worth of rate cuts since the beginning of 2019.

“The MPC judged that monetary policy should remain accommodative till prospects of sustained recovery are well secured,” Governor Shaktikanta Das said.

COMMENTARY

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

“As expected by us and the market, the RBI kept the policy rate (the repo rate) unchanged at 4% while keeping the stance as accommodative. This too is in line with our expectation despite the surging inflation since the massive second wave of infection has induced ample uncertainty about the recovery momentum.”

“While nobody is expecting a reversal of the momentum, there is already tell-tale evidence of stalling momentum. As we have been reiterating, various high-frequency data for February does suggest loss of momentum and this has seemingly extending to March.”

“More importantly, with domestic consumption being much more muted compared with the levels of activity, worries do persist even though RBI retained its FY21-22 real GDP growth expectation at 10.5%. This, we believe, will eventually be revised down by 2H21.”

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

“Today’s policy is in line with the expectations. The RBI’s assurance on the secondary market gilt purchase programme in FY22 will help in the management of the yield curve. However, the MPC’s projections of the GDP and CPI trajectories do not reflect the uncertainties created by the second wave of COVID-19 infections and the use of blunt measures like lockdowns in many states.” (Reporting by Nallur Sethuraman and Chandini Monnappa in Bengaluru; editing by Uttaresh.V)

Our Standards: The Thomson Reuters Trust Principles.

Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.

FOLLOWME Trading Community Website: https://www.followme.com

If you like, reward to support.
avatar

Hot

No comment on record. Start new comment.