The Monetary Policy Committee of the Reserve Bank of India on Thursday left policy rates unchanged for the second time, citing evolving growth-inflation dynamics. All six members of the MPC were unanimous in their decision to stand pat on rates. “The MPC recognises that there is policy space available for future action. The path of inflation is, however, elevated and on a rising trajectory through Q4:2019-20. The outlook for inflation is highly uncertain at this juncture. On the other hand, economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner,” said the policy statement. The MPC has sharply raised consumer price inflation projection to 6.5% for the fourth quarter of the fiscal year 2020 from 5.1-4.7% earlier. The committee pegged CPI inflation for the first half of FY21 at 5.4-5.0% compared with 4-3.8% earlier. For the third quarter of FY21, the forecast stands at 3.2% with risks broadly balanced. The committee noted that inflation trajectory will be determined by several factors including the pass through of telecom charges, increase in prices of drugs and pharmaceuticals and the impact of new emission norms.
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