Monetary policy: RBI keeps repo rate unchanged at 6%

Reserve Bank of India
Reserve Bank of India (RBI)

New Delhi, April 5: In the first monetary policy meeting of the new fiscal year on Thursday, the Reserve Bank of India kept the repo rate “unchanged” at 6% for the fourth time in a row.

According to the official data, retail inflation based on the Consumer Price Index (CPI) dragged to 4.44 percent in February, from 5.07 percent in January, but remained outside the central banks’ medium-term target of 4 percent.

“The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent, while supporting growth,” the RBI monetary policy stated.

Consequently, the reverse repo rate stood at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.

“We continue to remain vigilant on how inflation unfolds, in the sense that we are data dependent,” Addressing media after MPC meeting RBI Governor Urjit Patel said.

“The revised formula for MSP (minimum support price) as announced in the Union Budget 2018-19 for kharif crops may have an impact on inflation, although the exact magnitude will be known only in the coming months,” he added.

“Besides, in case of further fiscal slippage from the Union Budget estimates for 2018-19 or the medium-term path, it could adversely impact the outlook on inflation. Another risk is from fiscal slippages by states on account of higher committed revenue expenditure.”

“Also, companies polled by the RBI expect input and output prices to rise, going forward,” he added.

As per the MPC statement, the recent volatility in global crude prices has brought considerable uncertainty to the near-term inflation outlook.

The MPC noted that growth has been recovering and the output gap is closing, which “is also reflected in a pick-up in credit offtake in recent months”.

On the downside, the apex bank noted that “rising trade protectionism and financial market volatility could derail the ongoing global recovery”.

“In this unsettling global environment, it is especially important that domestic macroeconomic fundamentals are strengthened, deleveraging of distressed corporates and rebuilding of bank balance sheets persisted with, and the risk-sharing markets deepened,” the bank asserted.


Related Posts