Monetary policy review: RBI keeps repo rate unchanged at 6.5%

 

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Mumbai: The Reserve Bank of India (RBI) on Wednesday left the key interest rates unchanged at its fifth bi-monthly monetary policy. Five out of the six-member Monetary Policy Committee (MPC) voted in favour of keeping the repo rate unchanged at 6.50 percent and the reverse repo rate at 6.25 percent.

In its last monetary policy in October, RBI had maintained status quo on the benchmark interest rate but warned that volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation. RBI changed the policy stance to ‘calibrated tightening’ from ‘neutral’, while affirming its commitment to achieve the medium-term objectives to contain price rise.

Since embarking on a tightening cycle in June, the RBI has raised its policy repo rate by 50 basis points, with the last increase to 6.50 percent made in August.

The difficult credit conditions have hampered Indian businesses still struggling to recover from a series of economic shocks including the sudden replacement of all large denomination bank notes in late 2016 and the introduction of a goods and services tax in 2017.

Data released a few days ago showed the economy suffered an unexpectedly sharp slowdown in the July-September quarter, when annual growth slid to 7.1 percent from the two- year high of 8.2 percent posted in the previous quarter.

Weaker global oil prices and domestic food prices are expected to drag the headline inflation rate below projections. In October, inflation eased to 3.31 percent.

With Agency Inputs

 

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