RBI keeps repo rate unchanged at 6%

NewDelhi: The Reserve Bank of India (RBI) on Wednesday left the key interest rate unchanged amidst inflation scenariowarranting a rate cut.

Policy repo rate under liquidity adjustment facility (LAF) remains unchanged at 6.0 percent.Consequently, reverse repo rate under the LAF remains at 5.75 percent and marginal standing facility (MSF) rate and the Bank Rate at 6.25 percent.

The Central Bank has raised inflation forecast to 4.3-4.7 percent in third and fourth quarters of current fiscal while it has kept the economic growth forecast unchanged at 6.7 percent.

The reason for the decision was “achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 per cent, while supporting growth”, RBI said.

Reserve Bank Governor Urjit Patel-led Monetary Policy Committee, in a slightly less hawkish policy statement, said it was not cutting interest rates as it wanted to be more sure that inflation will stay subdued.

The Reserve Bank of India had reduced the benchmark lending rate by 0.25 percentage points to 6 percent in August, bringing it to a 6-year low.

However, in its October review, the MPC had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 percent for the current fiscal.

The wholesale prices based inflation in October shot up to a 6-month high of 3.59 percent. The retail inflation (Consumer Price Index) for October rose to a 7-month high of 3.58 percent.

That apart, reversing a five-quarter slide, the Indian economy bounced back from a three-year low with the GDP expanding by 6.3 percent in the July-September period as manufacturing revved up and businesses adjusted to the new GST tax regime.

The GDP growth in the second quarter of 2017-18 was higher than 5.7 percent in the preceding April-June period.