Recently, the Reserve Bank of India came up with a modified framework for Financial Market Infr...
The Reserve Bank of India informed that it had announced special open market operations, and it will continue to monitor evolving liquidity as well as market conditions. It further stated that it would take measured steps for the orderly functioning of the financial market.
The Reserve Bank, in its press release, specified that market sentiments had been impacted recently by concerns pertaining to the inflation outlook and the fiscal situation in global developments that have firmed yields abroad.
It caused widespread discussions among the enlightened public on yields on bonds and what actions can be taken by the Reserve Bank to meet the emerging threats. The Reserve Bank gave information on inflation in its communication dated 6th August 2020 as part of the minutes of the Monetary Policy Committee.
In a statement, RBI said that the National Statistical Office released data on headline CPI for June 2020 on 13th July along with imputed back prints of the index for April and May 2020. It resulted in a sharp upward revision of food inflation for April and May month. During quarter 1 2020-21, food inflation moderated from 10.05 % in April to 7.3% in June 2020.
In the meanwhile, fuel inflation went up as international kerosene, and the prices of LPG firmed up. The inflation excluding food and fuel was at 5.4% in the month of June, showing an increase in prices across most sub-groups.
A significant increase in inflation was registered in the month of June in:
RBI further stated that headline CPI inflation that was at 5.8% in March 2020, was placed at 6.1% in the provisional estimates for June 2020.
On the outlook for inflation, the resolution of the MPC (Monetary Policy Committee) identified the sources of inflation pressures and expected that even though headline inflation may stay elevated, it will moderate in H2:2020-21. Further, the Reserve Bank assured us that the Monetary Policy Committee chose to pause and stay vigilant and look to support the revival of the economy.
Considering the stabilizing prices of food and fuel and cost-push factors getting moderated, the Reserve Bank decided to remain vigilant about these developments. Moreover, as per RBI, the recent appreciation of the rupee is working towards containing the imported pressures of inflation. In support of the accommodative stance of the monetary policy, it was committed to ensuring comfortable liquidity and financing conditions in the economy.
With a view to ensuring orderly market conditions and congenial financial conditions, the Reserve Bank announced the following measures:
The Reserve Bank also stated that it stays committed to using all instruments at its command to revive the economy by maintaining congenial financial conditions and mitigate the impact of the Covid-19 pandemic and restore the economy to the path of sustainable growth at the same time preserving macroeconomic and financial stability.