RBI keeps repo rate unchanged at 6.5% in monetary policy review meeting RBI’s monetary policy committee at its meeting today lowered inflation projection sharply to 2.7-3.2% from 3.9-4.5% for the second half of 2018-19, while maintaining the policy stance at ‘calibrated tightening’ Last Published: Wed, Dec 05 2018. 03 34 PM IST

Gopika Gopakumar

RBI’s monetary policy committee retained its GDP growth estimate for the current year at 7.4%, but lowered projections for next fiscal to 7.5%.

New Delhi: The Reserve Bank of India (RBI)—at its monetary policy review meeting on Wednesday—kept its repo rate unchanged, citing benign inflation outlook and improved investment activity. The six-member monetary policy committee (MPC) voted unanimously to keep the repo rate at 6.5%, but voted 5-1 in favour of maintaining the policy stance as “calibrated tightening”. Among the MPC members, Ravindra Dholakia—known for his dovish stance—voted to change the stance to neutral.

The rate action was in line with the expectations of treasury heads of banks surveyed by Mint. The repo rate is the interest rate at which RBI lends money to the banks for the short term.

The MPC also lowered its inflation projection sharply to 2.7-3.2% from 3.9-4.5% for the second half of 2018-19, taking into account the fall in food inflation, crude prices and appreciating rupee. It expects inflation to rise to 3.8-4.2% in the first half of 2019-20.

The rate-setting panel, however, flagged risks to inflation outlook, going forward.

“Although recent food inflation prints have surprised on the downside and prices of petroleum products have softened considerably, it is important to monitor their evolution closely and allow heightened short-term uncertainties to be resolved by incoming data,” said the RBI monetary policy statement.

The panel retained its GDP growth estimate for the current year at 7.4%, but lowered projections for next fiscal to 7.5%.

The rupee, at present, is nearly 6% off its record lows and the recent fall in global crude oil prices has also eased worries over India’s current account deficit. Since the last policy, when the central bank surprised the market by keeping rates on hold, crude oil prices have slipped to around $60/ barrel, from four-year highs of $86/ barrel.

Data released last week showed the economy suffered an unexpectedly sharp slowdown in the July-September quarter, when Q2 GDP growth slid to 7.1% from a two-year high of 8.2% posted in the previous quarter.

First Published: Wed, Dec 05 2018. 02 32 PM IST livemint -used here for educational purposes