Before June 6 Rate Decision, Key Points To Know About RBI's Two Policy Reviews This Year

The Reserve Bank of India's Monetary Policy Committee, chaired by governor Shaktikanta Das, is due to announce its bi-monthly policy decision on Thursday. All eyes will be on any changes with respect to repo rate - the key interest rate at which the RBI lends short-term funds to commercial banks - and the commentary of the central bank's top brass on an economic slowdown, which has resulted in India losing its status as the fastest growing major economy to China. Before the release of the June 6 statement, in which economists expect a reduction in repo rate, here's a recap of the last two bi-monthly reviews, in February and April this year.

February 7

• Reduction in repo rate from 6.5% to 6.25%
• Change in monetary policy stance from "calibrated tightening" to "neutral" -- A neutral stance allows the RBI to move either way on the key rate
• Decision to change policy stance unanimous; four MPC members vote in favour of rate cut, two vote for status quo
• The RBI mentions a recovery in crude oil prices from their December lows due to production cuts; oil prices remain below their peak levels in October, it notes
• Global financial markets "began the year on a calmer note after a turbulent December", the RBI says
• Retail inflation declined from 3.4% in October to 2.2% in December, the lowest in last eighteen months, says the RBI
• The RBI cites continuing deflation in food items and a sharp fall in fuel inflation among reasons behind easing consumer inflation
• "Short-term outlook for food inflation appears particularly benign, despite adverse base effects," says the central bank
• Inflation outlook: Assuming a normal monsoon in 2019, the RBI lowers its consumer inflation projection citing "broadly balanced" risks:
  • to 2.8 per cent in the fourth quarter of 2018-19
  • 3.2-3.4 per cent in the first half of 2019-20
  • 3.9 per cent in the third quarter of 2019-20
• Economic growth outlook: The central bank projects GDP growth to pick up to 7.4% in 2019-20, from 7.2% in 2018-19:
  • 7.2-7.4 per cent in the first half of 2019-20
  • 7.5 per cent in Q3 of 2019-20
• The RBI says trade tensions and associated uncertainties appear to be moderating global growth

April 4

• Reduction in repo rate from 6.25% to 6%
• Five MPC members vote to maintain "neutral" stance, one votes to change it to "accommodative"; four members vote for cut in repo rate, two vote for status quo
• Global economic activity has been losing pace, policy stances of central banks in the US and other major advanced economies turned dovish, says the RBI
• The RBI points out a rise in crude oil prices on production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, and US sanctions on Venezuela
• It however notes that the oil prices may fall, despite production cuts by top producers, "should trade tensions linger and demand conditions worsen"
• It mentions a deceleration in economic activity for the third consecutive quarter "due to a slowdown in consumption, both public and private"
• The RBI says moderation of growth in global economy since February review might impact India's exports
• Retail inflation rose to 2.6% in February after four months of decline, the RBI notes
• The RBI says inflation in transport and communication fell, reflecting the reduction in petrol and diesel prices
• Inflation outlook: Assuming a normal monsoon in 2019, the central bank lowers its consumer inflation projection:
  • to 2.4% in the fourth quarter of 2018-19
  • 2.9-3% in the first half of 2019-20
  • 3.5-3.8% in the second half of 2019-20
• Economic growth outlook: The RBI lowers its projection to 7.2% in 2019-20 -- the same level as previous fiscal year
  • 6.8-7.1% in the first half of 2019-20
  • 7.3-7.4% in the second half