RBI has announced the monetary policy on Monday 7th April 2021. What was special in this monetary policy of RBI? To get the highlights of this policy and its impacts on the market today, read this article.
Introduction:
The Central Bank, RBI has announced its bi-monthly Monetary Policy on 7th April 2021 of the Fiscal Year 2021-22. RBI Monetary Policy was announced by RBI Governor Shaktikanta Das.
Key Highlights:
i) RBI has kept the Repor rate and Reverse Repo rate unchanged. These rates remain at 4% and 3.35% respectively. RBI downturns the expectation of the reduction in these rates.
ii) The Central Bank has decided to continue with Accommodative Stance and will continue with it until the prospects of recovery are secured.
But, the RBI announcement sounded like a Dovish which shown the prospect of a downward interest rate if needed.
This gave the feeling of a lower interest rate to the market, which it admires. As the lower interest rate will lead to higher earnings for the company or corporates which is a positive sign.
iii) RBI also said that it will not allow growth to steam. It means their major focus will be on the growth of the economy. If there will be no growth, there will be no employment generation in the economy and the situation might get worse. RBI Supports this through rate cuts.
iv) RBI has retained the GDP outlook as provided in the previous policy of 10.5% for FY22. RBI does not agree to downgrade the growth targets.
v) The Central Bank has also announced that it will participate in Open Market Offer conducted by Government to maintain liquidity in the economy.
Here, RBI announced Secondary Market G-Sec Acquisition Programme 1.0
vi) RBI keeps the inflation range between 4%-6%. Here also, RBI has forecasted the same inflation rate as they projected in February Policy. In the policy, the Inflation rate is estimated to be 5.2% for the first two quarters of the fiscal year 2021-22, 4.4% for the next quarter of FY22, and 5.1% for Q4FY21.
Main Concerns:
Conclusion:
RBI has announced its monetary policy where they kept their GDP outlook of the economy for the fiscal year 2022 unchanged at 10.5%. Also, this policy seems like a ‘Dovish’ which greatly pleased the market.