RBI holds rates, sees rise in inflation

Galtero Lara
Diciembre 7, 2017

As widely expected, RBI maintained a status quo on policy rates citing its neutral monetary policy stance and objective of achieving the medium-term target for consumer price inflation (or CPI) of 4 per cent within a band of +/- 2%, while supporting growth.

The central bank kept the economic growth forecast unchanged at 6.7 per cent for the fiscal ending March 31.

As a result of the MPC's decision, the policy repo rate (the rate at which RBI lends to banks) remains unchanged at 6 per cent and the reverse repo rate at 5.75 per cent.

The RBI's decision to keep rates on hold also appears to have been influenced by steady inflation expectations according to its household survey. "For that reason, it has maintained a neutral policy stance", a Ministry statement said. "The RBI governor, Dr. Urjit Patel, has also ruled out the possibility of any special dividend to the government out of profits for last fiscal year". On the other hand, some seasonal moderation in prices of vegetables expected in near months, lower prices of pulses and the recent reduction in GST rates for several retail goods and services which should translate into lower retail prices would have a downward effect on inflation.

More news: Chelsea elimina el Atlético Madrid — Champions League

In the previous meeting in October, RBI had also maintained status quo on rates.

The decision on the MPC was not unanimous.

The Sensex, which had lost 100 points in early trade, continued its slide and fell 217.78 points, or 0.66 per cent, to 32,584.66. On growth, the RBI said that Q2 growth was lower than that projected in the October resolution but retained its gross value added forecast for FY18 at 6.7 per cent with risks evenly balanced. It noted that these could get a further shot in the arm if banks passed on past rate changes on to lending rates on outstanding loans.

"Keeping in mind the output gap dynamics, the MPC chose to continue with the neutral stance and watch the incoming data carefully".

Otros informes por

Discuta este artículo