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Pandemic’s macroeconomic impact more severe: RBI Guv

Pandemic’s macroeconomic impact more severe: RBI Guv
May 22
14:12 2020

MUMBAI: Reserve Bank’s Governor Shaktikanta Das on Friday said the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated.

In an online address to announce the reduction in key lending rates, Das said: “The MPC is of the view that the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, and various sectors of the economy are experiencing acute stress.”

“The impact of the shock has been compounded by the interaction of supply disruptions and demand compression. Beyond the destruction of economic and financial activity, livelihood and health are severely affected.”

He said that it is necessary to ease financial conditions further which will facilitate the flow of funds at affordable rates and revive ‘animal spirits’.

“With the inflation outlook remaining benign as lockdown-related supply disruptions are mended, the policy space to address growth concerns needs to be used now, rather than later to support the economy, even while maintaining headroom to back the revival of activity when it takes hold,” he said.

On Friday, the MPC of the central bank in an unscheduled meet reduced the key – repo – rate to 4 per cent from 4.40 per cent.

Consequently, the reverse repo rate has automatically been reduced to 3.35 per cent from 3.75 per cent.

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