Back

RBI Policy: No new explicit time-based forward guidance on stance

Informist, Wednesday, Apr 7, 2021

 

NEW DELHI – The Monetary Policy Committee did not provide a new explicit time-based forward guidance on how long it will maintain its current accommodative stance.

 

The committee's statement today dropped the forward guidance it first provided in October and reiterated in December and February–that it had decided to maintain the accommodative stance at least during 2020-21 (Apr-Mar) and into 2021-22–and largely reverted to its usual guidance.

 

"Furthermore, all members of the MPC voted to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward," the statement said.

 

In August, before the provision of the time-based forward guidance on the stance, the committee's statement had said its members had voted to continue with the accommodative stance as long as necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

 

In his address earlier today, Governor Shaktikanta Das elaborated on the guidance provided by the committee in its statement.

 

"In other words, the stance of monetary policy will remain accommodative till the prospects of sustained recovery are well secured while closely monitoring the evolving outlook for inflation," Das said.

 

Pressure on the Monetary Policy Committee to maintain its accommodative stance as well as provide a guidance on how long it will continue with it has increased, thanks to the second wave of the coronavirus as well as the government's oversized borrowing programme.

 

Not only does an accommodative stance of monetary policy ensure interest rate hikes are less likely than when the stance is neutral, its alignment with the RBI's stance on liquidity means easy availability of funds for the banking system. This makes the stance, through the liquidity channel, crucial for the revival of private capital expenditure, whose re-mergence is essential for a broader economic recovery.

 

Das had said in his statement in the minutes of the February meeting that the explicit forward guidance goes a long way in soothing market apprehensions.  End

 

Reported by Siddharth Upasani

Edited by Vandana Hingorani

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2021. All rights reserved.

 

Other News

IPO Alert: Shriram Properties files draft prospectus with SEBI

Informist, Saturday, Apr 10, 2021 NEW DELHI – Shriram Properties Ltd filed its draft red herring prospectus with the Securities and Exchange Board of India on Friday for its initial public offering, the company today said in a press release. The issue comprises shares with a face value of 10 rupees each aggregating up to 8 bln rupees. The fresh […]

EDITORIAL: RBI’s gilt purchase plan quantitative easing by ‘jugaad’

Informist, Friday, Apr 9, 2021 Indians are experts at working with the resources at their disposal and coming up with the sort of life hacks which has given form to the word 'jugaad'. The Reserve Bank of India seems to be no exception, going by its new gilt purchase programme. The first version of the gilt acquisition programme, […]

Govt source says FY21 fisc gap seen lower than revised aim of 9.5%

Informist, Friday, Apr 9, 2021 –Govt source: See higher than projected revenues, spending in FY21 By Adrija Chatterjee and Shubham Batra NEW DELHI – The fiscal deficit for 2020-21 (Apr-Mar) is likely to be lower than the revised projection of 9.5% of GDP, a top finance ministry official told Informist. As per provisional estimates with the ministry, both the revenues […]