Wednesday , January 20 2021

India’s RBI vows easy money as long as needed to aid growth


India’s central bank pledged to keep its easy money policy for as long as necessary to support the virus-battered economy, while for now leaving borrowing costs unchanged amid stubborn inflation.
The Reserve Bank of India (RBI) will use a variety of tools to ensure easy financing conditions and market stability, Governor Shaktikanta Das said after a meeting of the Monetary
Policy Committee.
The panel decided to leave the benchmark repurchase rate steady at 4% — a decision forecast by all 32 economists surveyed by Bloomberg. Central banks in the Asia-Pacific have stepped up on stimulus to cushion their economies from the onslaught of the pandemic, including through deeper rate cuts. A resolution to retain an accommodative stance for “as long as necessary” was the closest Indian policy makers got to providing support for an economy that’s now entered a recession.
A surge in inflation has prevented Das from following through on earlier calls for coordinated policy action in response to the pandemic.
Thirteen Asia-Pacific economies had paused rate
cuts between mid-July and end-September, with Australia, Indonesia, and the Philippines resuming policy easing since. Das has instead relied on unorthodox measures to support the economy. He’s used the Federal Reserve-style Operation Twist — buying long-dated debt while selling short-tenor bonds — to keep benchmark borrowing costs down, while the central bank’s suspected intervention in the foreign exchange market and subdued demand for loans has kept the banking system flush with cash.
Sovereign bonds advanced as the RBI refrained from taking steps to soak up that liquidity, which was expected by markets.

About Admin

Check Also

BOJ likely to hint at skipping of ETF buys

Bloomberg The Bank of Japan’s (BOJ) upcoming policy assessment is likely to signal a pause ...

Leave a Reply

Your email address will not be published. Required fields are marked *