BANK NEWS
RBI announced the monetary policy decision
New Delhi: The monetary policy meets the schedule for the three days on 4th, 5th, and 6th July 2020 respectively for forming the new monetary policy framework. The MPC voted unanimously to leave the policy repo rate unchanged at 4 percent and continue with the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19 while ensuring that inflation remains within the target going forward. The Marginal Standing Facility (MSF) rate and the Bank rate remain unchanged at 4.25 percent. The reverse repo rate stands unchanged at 3.35 percent.
Global financial markets, however, have been buoyant, with the return of risk-off sentiment inserting a disconnect from the underlying state of the real economy. Portfolio flows to emerging markets have resumed and their currencies have appreciated.
The global manufacturing purchasing managers’ index (PMI) and the global services PMI rose to 50.3 and 50.5, respectively in July, moving back to the expansion zone. The World Trade Organisation (WTO) has estimated that the volume of merchandise trade shrank by 3.0 percent year-on-year in Q1 and early estimates suggest a fall of 18.5 percent in Q2.
In India too, economic activity had started to recover from the lows of April-May. CPI inflation, which was at 5.8 percent in March 2020, was placed at 6.1 percent in the provisional estimates for June 2020. Inflation pressures were evident across all sub-groups.
Mainly there are lots of things given supply chain distribution on account of COVID-19 persist, with the implications for both food and non-food prices which emerges as the bumper rabi harvest eases prices of cereals, especially if open market sales and public distribution. It is also noted theta the recovery of the rural economy is expected to be robustly buoyed by the progress in Kharif sowing.
Higher domestic taxes on petroleum products have resulted in elevated domestic pump prices and will impart broad-based cost-push pressures going forward. The inflation prints of April-May 2020 are obscured by the spike in food prices and cost-push pressures.
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