Banking News - Third Bi-Monthly Monetary Policy, 2014-15 By Gandhi Raveendra Reddy

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Here I am posting the important Third Bi-Monthly Monetary Policy, 2014-15 by RBI which is important to know by every bank job aspirant.

Third Bi-Monthly Monetary Policy, 2014-15

The Reserve Bank of India (RBI) in its third bi-monthly monetary policy statement for 2014-15 kept the repo rate unchanged at 8%. The reverse repo rate was kept unchanged at 7% and Cash Reserve Ratio ( CRR) was maintained at 4%.

The SLR was cut by 50 bps to 22%. "The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said.

"The recent fall in international crude prices, the benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should measures undertaken to improve food management," the bank said.

However the central bank said, "There are, however, upside risks also, in the form of the pass-through of of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement, and strengthening growth in the face of continuing supply constraints."

Accordingly, the upside risks to the target of ensuring CPI inflation at or below 8 per cent by January 2015 remain, although overall risks are more balanced than in June, the bank said. "It is, therefore, appropriate to continue maintaining a vigilant monetary policy stance as in June, while leaving the policy rate unchanged," it added.

According to RBI, the prospects for reinvigoration of growth have improved modestly. The firming up of export growth should support manufacturing and service sector activity.

The Reserve Bank will continue to monitor inflation developments closely, and remains committed to the disinflationary path of taking CPI inflation to 8 per cent by January 2015 and 6 per cent by January 2016, the policy statement said.

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