RBI Monetary Policy Announcement August 2021

By siliconindia  |  Friday, 06 August 2021, 10:46:58 AM IST

RBI Monetary Policy Announcement August 2021

RBI governor Shaktikanta Das has announced the August bi-monthly monetary policy statement. Unsurprisingly, the RBI has retained the repo rate unaffected at four percent for a seventh straight meeting. The Monetary Policy Committee continues to sustain its 'Accomodative’ stance. The reverse repo rate stands at 3.35 percent.

The statement follows the three-day review meeting of the six-member Monetary Policy Committee (MPC) which kick started on Wednesday. Majority of economists expected the RBI’s MPC to keep the key lending rate unchanged.

The central bank continues to assume that a hasty withdrawal of monetary policy support could agitate the economic recovery that is taking shape. Economists, thus, expect RBI to initiate policy normalization only by the fourth quarter of the current fiscal year.

RBI Monetary Policy:

  • Deepthi Mathew, Economist at Geojit Financial Services says, "In an expected move, MPC kept the rates unchanged and continued with the accommodative stance. Though the MPC voted unanimously to keep the rates unchanged, votes for the continuance of accommodative stance were at 5:1. It shows that the inflation debate is getting more prominent. The forecast of inflation rate for FY22 was revised upwards to 5.7 per cent from 5.1 per cent announced earlier. RBI's assurance to conduct OMOs when needed would help to keep the bond yields in check."
  • The Governor again reiterated that the RBI's priority as "to promote growth within the framework of financial stability". The RBI is rightly alarmed that any departure from the present pro-growth monetary policy may " kill the nascent and hesitant recovery. " The communication from the central bank augurs well for the continuation of the growth impulses in the economy," says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
  • RBI intends to conduct two more auctions of 25,000 crore each on August 12 and August 26 under the G-sec Acquisition Program (GSAP)
  • CPI inflation is projected at 5.7 percent during 2021-22 this consists of 5.9 percent in Q2, 5.3 percent in Q3 and 5.8 percent in Q4 of 2021-22 with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1percent RBI Governor Shaktikanta Das
  • Any action to curb inflation now could kill the nascent and hesitant recovery: Das
  • RBI Governor Das states that high frequency indicators for economy are progressing
  • RBI keeps GDP growth forecast for FY22 unaffected at 9.5 percent
  • 'Accomodative' stance is not unanimous; it’s passed by 5:1 vote: RBI
  • CPI inflation surprised on the upside in May; price momentum however moderated. Outlook for aggregate demand is improving but underlying conditions are still weak. More needs to be done to restore supply-demand balance in no. of sectors: Governor Shaktikanta Das
  • In a much better position as compared to June 2021. Need to remain vigilant on possibility of a third wave: Governor Shaktikanta Das
  • Vaccine manufacturing and administration are steadily raising; yet the need of the hour is not to drop our guard and to remain vigilant against any possibility of 3rd wave: Das
  • The Reserve Bank of India (RBI) has announced the monetary policy in which it has kept the repo rate unchanged at four percent, announces Governor Shaktikanta Das

ON THE DECK

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