RBI keeps repo rate unchanged at 6.5%

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Mumbai: Proving all estimates wrong, the Reserve Bank of India (RBI) today kept the repo rate unchanged at 6.5%. However, the MPC changed the stance from ‘Neutral’ to ‘Calibrated Tightening’. Market watchers and top economists were expecting a 25 basis point hike once again after June and August. RBI has retained growth projections fro 2018-19 financial year at 7.4%.

“On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to  keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent. Consequently, the reverse repo rate under the LAF remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. The main considerations underlying the decision are set out in the statement below”

The central bank had hiked interest rate by 25 basis points each in June and August. The central bank held its fourth bi-monthly Monetary Policy Committee (MPC) meeting of FY19 against the backdrop of the sharp depreciation in the rupee, rising crude oil prices, intense pressure on current account deficit (CAD) and liquidity issues.

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