RBI Monetary Policy Review: 5 quick takeaways

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 RBI Monetary Policy Review: 5 quick takeaways
The much awaited RBI Monetary Policy Review turned out to be a non event, as the RBI left key policy rates unchanged. Here are a 5 quick takeaways from the policy.

Repo, CRR rates unchanged

The RBI has left the cash reserve ratio (CRR) of scheduled banks at 4.0 per cent of their net demand and time liabilities, which was the same as before. The repo rates also has not been touched, thus largely maintaining the status quo on major policy instruments.

Recent liquidity draining measures maybe rolled back

The RBI has said that the recent liquidity tightening measures aimed at checking undue volatility in the foreign exchange market will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation.

External factors, the biggest risk

The RBI has said that by far, the biggest risk to the macroeconomic outlook stems from the external sector. Financial markets around the world went into a flash turmoil on the perception of an earlier than expected tapering of QE by the US Fed. The external factors according to the RBI remained the biggest risks.

CAD: A major risk

The RBI has said that the large current account deficit (CAD), well above the sustainable level of 2.5 per cent of GDP for three years in a row, is a formidable structural risk factor. "It has brought the external payments situation under increased stress, reflecting rising external indebtedness and the attendant burden of servicing of external liabilities," the RBI has stated in a release.

Inflation in line with expectations

In the May Policy, the Reserve Bank indicated that during 2013-14, WPI inflation will be range-bound around 5.5 per cent, with some edging down in the first half and some increase in the second half, mainly on base effects. During Q1 of 2013-14, the inflation trajectory has moved largely in line with these expectations, although some risks to the path of inflation have surfaced in June.

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Read more about: rbi, monetary policy review, crr, repo
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