The Reserve Bank of India will announce the fifth bi-monthly monetary policy statement for 2018-19 this afternoon.
In its last bi-monthly monetary policy, the bank had kept the repo rate unchanged at 6.5 percent. The reverse repo rate is used by the monetary policy committee as a tool to control the money supply in the country.
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"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has made a decision to conduct the purchase of ... government securities under open market operations for an aggregate amount of Rs 100 billion on December 6, 2018 (Thursday)", the central bank said. Moreover, the central bank had said in its October policy that a rate cut was off the table.
Weaker global oil prices and domestic food prices are expected to drag the headline inflation rate below projections. For the first half of 2019-20, the GDP is been projected at 7.5 per cent. RBI said inflation in the second half of the current fiscal is projected at is projected at 2.7-3.2 per cent.
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Over the past five years, annual inflation saw its lowest level in April 2013, with 6.13 percent, and its highest level this October. It also means "we are not bound to increase interest rates every meeting, because that's not needed", RBI Governor Urjit Patel had explained in the previous meet.
Bankers expect the central bank to revise the inflation trajectory downward by 10-20 basis points (bps). This could comfort MPC, given that falling crude prices ease import pressures. At present, the Cash Reserve Ratio (CRR) balance of banks at the end of the day is being disclosed with a lag of 2-3 days, while the details of the currency in circulation are being released with a lag of one week.
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