Economy

RBI keeps key policy rate unchanged at 6 per cent

RBI keeps key policy rate unchanged at 6 per cent

The MPC in a note found that growth has been recovering and the output gap was closing.

The two-day meeting of the Monetary Policy Committee (MPC) headed by Governor Urjit Patel of the Reserve Bank of India will end today. Consequently, the reverse repo rate is 5.75 per cent and the marginal standing facility (MSF) rate and the bank rate stand at 6.25 per cent.

Second, the staggering impact of house rent allowance revisions by various state governments may push headline inflation up, he said.

On the whole, GDP growth is projected to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in 2018-19 - in the range of 7.3-7.4 per cent in H1 and 7.3-7.6 per cent in H2 - with risks evenly balanced, the central bank said.

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In view of the global price rise in crude oil prices, the likelihood of a cut in interest rates by the MPC is quite low. "There can be some dent in the risk appetite among banks to give loans after the issues related to loan fraud were detected, which could add uncertainties to the pace of the near term recovery", said Siddhartha Sanyal, chief India economist at Barclays in Mumbai. In doing so, the MPC reiterated its commitment to keep inflation at the target of four percent in the medium term and to remain vigilant on how actual inflation unfolds.

Ramesh Nair, CEO and Country Head of Jones Lang LaSalle India believes that the decision was in the offing. But these currencies have slumped in recent months as regulatory scrutiny increased; bitcoin traded around $6,670 on the Bitstamp exchange on Thursday. The Monetary Policy Committee (MPC) is probably going to stay with its "neutral" position and banner vulnerability over the expansion viewpoint past June because of variables, for example, oil costs and the administration's guarantee of expanding the base price tag of food grains from agriculturists.

"On the basis of an assessment of the current and evolving macroeconomic situation1 at its meeting today, the Monetary Policy Committee (MPC) chose to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 percent". Also ambitious government projects like healthcare insurance and hike in MSP for agricultural produce will need higher government reserves. Now it is observed the MCLRs are higher by 10% - 12% in most leading retail lending banks. A larger part of the business analysts surveyed anticipates that the RBI will just begin bringing rates up in mid-2019.

This is the fourth policy review in sequence in which the MPC has kept the Repo Rate unchanged.


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