RBI changes Repo rate in Third Bi-Monthly Monetary Policy

RBI changes Repo rate in Third Bi-Monthly Monetary Policy
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RBI changes Repo rate in Third Bi-Monthly Monetary Policy

 

Date: August 1, 2018

 

The Reserve Bank of India released its third bi-monthly policy statement. The policy repo rate was raised by 25 points to 6.5 percent for the coming months.

 

What is the bi-monthly policy statement of RBI?

The monetary policy of India is decided by the Monetary Policy Committee of India. The commission decides the benchmark interest rates of banks in India. The committee meets four times every year. The committee is composed of six members, of which three are RBI officials. The other three are decided by the Government of India. The chairman ex officio of the committee is the governor of RBI, and the Chairman casts his vote if any decision results in a tie.

Also read functions of Reserve Bank of India…

What was decided at the third meet of RBI?

The RBI hiked the repo rate for the second consecutive time this year. The repo rate now is 6.5 per cent and the reverse repo rate is at 6.25 per cent. The marginal standing facility is at 6.75 per cent. Citing the global economic climate of slowing or moderate growth and trade uncertainty, the monetary policy is going to remain neutral. As for forecasts, the Committee predicted the GDP growth to be in the range 7.5-7.6 per cent in the period of April-September. Inflation was forecast at 4.8 per cent for the second part of this fiscal year.

 

Remarks on global economic climate:

The RBI monetary statement also made remarks on the global economies, and singled out the trade wars between major economies. The Chinese economy slowed in growth due to efforts to lessen debt. The US economy had significant growth to show because of rising exports and personal consumption. The Japanese economy showed moderation in growth after a strong show in Q1.

 

Next Bi-Monthly Monetary Policy Meeting 

The next bi-monthly meeting(and the final meeting) will be held on October 3. The subsequent statement will be released on October 5.

 

Some Quick Facts

  • The Monetary Commission is mandated to maintain retail inflation at 4% with an upper and lower tolerance of 2%.
  • The three external members of the committee are Chetan Ghate, Pami Dua and Ravindra Dholakia.

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