INSUBCONTINENT EXCLUSIVE:
Mumbai: The Reserve Bank of India left interest rates and monetary policy stance unchanged but lowered retail price forecast, kindling hopes
of a rate cut if inflation stays benign.
It may be months before the monetary policy committee (MPC) actually cuts rates and RBI governor
lowered inflation forecast for the second straight time on Wednesday, projecting a rate of 2.7-3.2 per cent in the second half, from the
3.9-4.5 per cent forecast during the previous policy meet.
For the first half of FY20, inflation is projected at 3.8-4.2 per cent, with
bringing down domestic fuel prices
The benchmark bond yield has dipped 50 basis points since then
The Federal Reserve, too, is seen restraining the pace of rate increases next year as growth in US slows
Retail inflation, as measured by the Consumer Price Index, was at 3.31 per cent in October, compared with 3.7 per cent in September.
The
central bank also ruled out any special liquidity window for non-banking finance companies, saying the liquidity situation has been managed
to reflect normal market conditions
However, the regulator promised to act if the situation goes out of hand, which appears remote at this point.
Beginning April, retail
consumers and promoters of small and medium enterprises will have their floating rate borrowing linked to one of the four benchmarks which
includes the yield on 91-day treasury bills and the spread will remain constant till the loan winds down.
RBI also announced a road map for
lowering statutory liquidity ratio by 150 basis points with a 25-basis points cut every quarter, a move that would make more than Rs 1 lakh
crore of funds available for lending.
Repo rate, the rate at which the central bank lends to banks, was kept at 6.5 per cent
existing levels.
An ET poll of 23 market participants did not expect any rate cut, but said MPC could suggest some policy measures to ease
The rupee fell 0.05 per cent to 70.46 to a dollar
The Sensex declined 0.69 per cent to end at 35,884.41 points.
Economic growth outlook has been maintained at 7.4 per cent despite slow
cent owing to the credit squeeze.
While slowing growth may not be a worry yet, RBI said there is sufficient liquidity in the banking system
