It’s Friday and the RBI MPC Meeting has gone live as it reaches its 32nd MPC meeting.
This meeting has been highly anticipated as it is the final one for 2023 and supposedly so, the Governor Das calls it the ‘special’ one yet.
Here are the highlights of the 32nd RBI MPC Meeting 2023:
Mr Shaktikantha Das begins the speech with a shocking revelation that the year spanning from 2020 – 2023 will be going down in history as a period of great volatility.
He further went on to say that Headline inflation has receded from the highs of last year and it remains to be above target in several countries. However, Mr Das says that Cor inflation remains sticky.
RBI MPC Meeting – Repo Rate:
The RBI has maintained a status quo, keeping the repo rate unchanged at 6.5%.
The rate-setting panel has also left the policy stance unchanged with a focus on the withdrawal of accommodation.
Inflation Data:
Coming to Inflation, Mr Das, Governor of the RBI said that Food inflation may lead to an uptick in inflation numbers.
There has been broad-based easing in core inflation, indicative of successful disinflation through monetary policy action. He further went on to add that the near-term outlook is covered by risks to food inflation, leading to an uptick in November and possibly in December. Further data could only be ascertained from second-round effects if any.
The CPI inflation has been projected at 5.4% for FY 24.
The Central Bank of India is maintaining its inflation projections for the current fiscal year at the rate of 5.4%, despite the apprehensions regarding the escalation of food prices, fluctuation in the crude oil expenses and domestic economic growth that will exert inflationary pressure.
In the eyes of the RBI, the target of 4% inflation is yet to be reached and the headline inflation continues to remain volatile.
Government Bonds:
The RBI also discussed the sale of government bonds and their outlook. The current reduction in the overall liquidity has resulted in no requirement to carry out open market sales of government bonds.
Banks and financial institutions:
The RBI had a positive viewpoint concerning the steps taken by Banks and financial institutions.
“We do not wait for the house to catch fire and then act” said RBI Governor Das stating that the pre-emptive steps taken by banks and NBFCs have played an important role in maintaining the economy.
He further went on to say that the persistent deficit conditions in October and November compelled the banks to utilize the Marginal Standing Facility (MSF) and the Systematic Lending Facility (SDF).
In addition, Mr Shaktikanta Das announced that the reversal of liquidity facility under the Systematic Lending Facility (SDF) and the Marginal Standing Facility (MSF) will now be permitted by the RBI even on weekends and on holidays.
Fintech and UPI:
With the revolutionary UPI system in full swing, the RBi has intimated that the UPI transaction limit for payment to hospitals and educational institutions has been hiked to INR 5 lakhs from the previous INR 1 lakh.
In addition, the RBI has proposed to set up a fintech repository for the better development of the fintech system.
The RBI Governor said:
We have observed various issues related to the web aggregation of loan production adversely affecting consumers’ interests. In response to these concerns, the RBI will establish a regulatory framework for such practices. This initiative aims to enhance transparency in digital lending.”
Forex :
The RBI had announced that India’s foreign exchange reserves had reached $604 billion for the week ending December 1. This has marked an increase of $2.54 billion compared to the previous week’s reserves, which stood at $597.94 billion as of November 24.
Perspective from Commodity Samachar:
The RBI MPC meeting 2023 was an important announcement for the Indian market but talking about the future outlook, there are a few things to understand. Analysts at Commodity Samachar shared their views with respect to the future outlook and they had this to say.
” During the RBI MPC meeting, Governor Shaktikanta Das announced that the Repo rate would remain unchanged at 6.5% for the fifth consecutive time. Raising interest rates is considered a monetary policy tool that can help in reducing inflation rates.
Our equity market has recently reached a new all-time high level of 21006. As a result of the RBI MPC meeting outcome, we anticipate the market to undergo a correction, and the money market, including bonds, ETFs, fixed deposits (FD), and recurring deposits (RD), may experience an upward surge.”
Commodity Samachar
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