Epic Update RBI The Reserve Bank of India has kept its key policy rate or the repo rate unchanged at 6.25 percent for the second time in a row.
All other rates — reverse repo rate, the marginal standing facility rate and the bank rate — were left unchanged.
All six members of the Monetary Policy Committee (MPC) voted in favour of holding rates. The RBI also changed its stance from accommodative to neutral.
The central bank was widely expected to lower borrowing costs given the surge in bank deposits and slower pace of economic growth followed by the shocking demonetisation.
The Consumer Price Index-based inflation was under control in November and December last year — two key months during which the cash ban impact led to reduced consumption. Consumer prices cooled to 3.63 percent in November, and slipped further down to 3.41 percent in the following month.
This is in line with RBI’s target of inflation at 5 percent by March 2017 and government’s target of around 4 percent, with a band of 2 percent on either side in the next 4 years.
It is important to note that economic growth for this fiscal year has been lowered by 25-50 basis points compared to the baseline growth assumption of 7 percent.
For 2017-18, the government’s Economic Survey expects real GDP growth to be in the 6.75-7.5 percent range.
In the previous December policy, the six members had unanimously voted in favour of a status quo.
The six members of Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel met for two days on Tuesday and Wednesday before announcing their decision at 2.30 pm today. The minutes of the meetings are expected to be published 14 days from now.
This was the central bank’s sixth bi-monthly and last policy for the year 2016-17 and the third by the MPC.
Since January 2015, when the interest rate easing cycle began, the central bank has reduced repo rate by 175 bps, and by 50 bps since January last year.
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