Tag: RBI MPC MEETING

RBI MPC cuts repo rate for first time in 5 years: Governor Sanjay Malhotra administers a growth pill with 25 bps rate cut. RBI MPC Meeting February 2025 Key Highlights & Outcomes: Following are the highlights of the bi-monthly monetary policy announced by the Reserve Bank of India Governor Sanjay Malhotra on 7th February 2025: Rate cut of 25 bps to 6.25% to boost growth. GDP expected to grow at 6.7% in 2025-26, driven by consumption & investment. Inflation projected at 4.2% for 2025-26, barring major shocks. Global risks (geopolitics, trade policy, financial volatility) remain key concerns. Neutral stance maintained to allow flexibility in response to changing conditions. Other Adjustments: Standing Deposit Facility (SDF) rate: 6.00% Marginal Standing Facility (MSF) rate & Bank Rate:50% India’s Economic Growth (2024-25): GDP Growth Estimate: 4% YoY, driven by private consumption recovery; (Quarterly estimates: Q1 - 6.7%, Q2 - 7.0%, Q3 & Q4 - 6.5% each) Headline Inflation: Declined from 6.2% in Oct 2024 to lower levels in Nov-Dec 2024 due to falling food inflation Projections for 2024-25: CPI Inflation: 4.8% (Q4: 4.4%); Projections for 2025-26: CPI Inflation: 4.2% Monetary Policy Committee (MPC) – RBI Established: 2016 under the RBI Act, 1934 (Amended). Objective: Formulate India’s monetary policy, primarily to control inflation and ensure economic stability. Composition: 6 members 3 from RBI (including the Governor as Chairperson). 3 external experts nominated by the Government of India. Decisions based on: Majority vote (Governor has a casting vote in case of a tie). Mandate: Maintain inflation target of 4% (+/-2%) as per the Flexible Inflation Targeting (FIT) framework. Meetings: Bi-monthly (every two months) to review key rates (Repo Rate, SDF, MSF, etc.). Significance: Ensures transparency & accountability in monetary policy decisions. Key Terms 1. Bi-Monthly Monetary Policy Announced every two months by the RBI's Monetary Policy Committee (MPC). Aims to control inflation, stabilize currency, and promote growth. Includes decisions on Repo Rate, Reverse Repo Rate, SDF, MSF, and Bank Rate. 2. Gross Domestic Product (GDP) Total monetary value of all final goods & services produced within a country. Measured in Real GDP (inflation-adjusted) and Nominal GDP (current prices). Indicates economic growth and development. 3. Standing Deposit Facility (SDF) Rate Introduced in April 2022 by RBI. Floor rate for liquidity absorption without collateral. Helps in controlling excess liquidity in the banking system. 4. Marginal Standing Facility (MSF) Rate Emergency borrowing window for banks from RBI against Statutory Liquidity Ratio (SLR) securities. Higher than the Repo Rate to discourage frequent borrowing. Helps banks meet short-term liquidity mismatches. 5. Bank Rate Rate at which RBI lends to commercial banks without collateral. Generally aligned with the MSF Rate. Affects loan interest rates & overall credit availability. 6. Inflation Sustained increase in the general price level of goods & services. Measured by Consumer Price Index (CPI) & Wholesale Price Index (WPI). RBI uses monetary policy tools (Repo Rate, SDF, etc.) to control inflation.

Tag: RBI MPC MEETING

RBI MPC MEETING

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