RBI MPC Highlights: 'Timing Of Actions Is Key', Says Das After Keeping Key Rates Unchanged

India's foreign exchange reserves are "quite robust" and the depletion of reserves is because of valuation losses, Governor Shaktikanta Das in a press conference with reporters.

Governor says,

• Forex reserves are quite adequate currently.

• How the forex market will behave can't be assessed; there are so many uncertainties.

The BRICS currency was an idea that was raised by one of the member countries and "no decision" has been taken on the same, Governor Shaktikanta Das in a press conference with reporters after keeping the key benchmark rates unchanged.

His comments come after US President-elect Donal Trump warned BRICS nations that he would require commitments that they would not move to create a new currency as an alternative to using the US dollar and repeated threats to levy a 100% tariff.

Governor says,

• There is no step that we have taken with the intention of de-dollarisation.

• We have permitted the opening of Vostro accounts and entered agreements with two countries for local currency trade.

• De-dollarisation is not on the table at all; rather it is a narrative in certain sections.

• Even if the US increases tariffs, it won't be an isolated event.

• Difficult to say what the unilateral move would be in response to higher US tariffs.

The CRR increase was done in April 2022 as a temporary measure, Governor Das said adding that it has "served its purpose and it was time to normalise it."

The central bank slashed the cash reserve ratio by 50 basis points to 4% to all banks in order to revive economic growth by improving liquidity.

Governor says,

• What the banks use the CRR money for is their call.

• We clearly see that liquidity is going to be tight in the latter part of December and going into January.

• We don't make monetary policy or liquidity decisions keeping in mind the balance sheet requirements of banks.

In the life of a central bank, there is no room for knee-jerk reactions, Governor Shaktikanta Das in a press conference with reporters after keeping the key benchmark rates unchanged. The RBI expects tight liquidity in the remainder of the financial year, he said.

Governor says,

• Our effort is always to follow the legal mandate given to us on inflation and growth.

• We need more credible evidence on what the outlook is likely to be.

• Whatever action we take must be well-timed.

• I think we have managed to remain in-line with the curve on monetary policy

JP Morgan views India's MPC decision to hold rates as dovish, with a 50 bps CRR cut that "opens door" to a February rate cut, contingent on inflation tracking the RBI's projections.

A rate cut would be unlikely if RBI raises its inflation forecast at the same time. JP Morgan sees modest downside risks to the 6.6% GDP growth forecast, with the RBI likely to act on growth once more confident in CPI trends. The CRR cut will release Rs 1.16 trillion in durable liquidity into the system.