Monetary Policy Update - April 2022 - ICICI Direct

The Reserve Bank of India (RBI) maintained its repo rate at 4.0%, reverse repo rate at 3.35% and MSF at 4.25% with all MPC members unanimously voting on status quo on rates. They have also decided unanimously to maintain an 'accommodative' stance with focus to withdraw accommodation to ensure inflation remains within target, going ahead. It has restored the width of the liquidity adjustment facility (LAF) corridor to 50 basis points, the position that prevailed before the pandemic. The marginal standing facility (MSF) rate and the BANK rate remain unchanged at 4.25%. With the aim of adding additional tool to absorb liquidity RBI has introduced standing deposit facility (SDF) at 3.75%, i.e. 25 bps below policy rate, which will work as floor for the LAF corridor.

According to RBI and as mentioned in the policy document, the escalation of the geopolitical situation and the accompanying surge in international crude oil and other commodity prices, tightening of global financial conditions, persistence of supply-side disruptions and significantly weaker external demand pose downside risks to the outlook. The future course of the pandemic and the uncertainties about the pace of monetary policy normalisation in major advanced economies also weigh on the outlook Given the evolving risks and uncertainties RBI has decided to maintain status quo on key rates as well as maintain accommodative stance for now.

The projection of real GDP growth for FY23 has been revised downwards at 7.2% from 7.8% earlier, consisting of 16.2% in Q1; 6.2% in Q2, 4.1% in Q3 and 4.0% in Q4.

Consumer Price Index (CPI) inflation forecast for FY23 has been revised upwards from 4.5% to 5.7%. RBI's quarterly CPI inflation forecasts are: 6.3% for Q1FY23, 5.8% for Q2FY23, 5.4% for Q3FY23, and 5.1% for Q4FY23.

For details, click on the link below: Link to the report

Source : Equity Bulls

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