RBI Leaves Repo Rate Unchanged at 6%, Reverse-Repo at 5.75%

The central bank left economic growth forecast unchanged at 6.7 percent for the current fiscal.

The Reserve Bank of India kept its policy rate unchanged at a seven-year low of 6 percent on Wednesday, 6 December. This comes after inflation accelerated to a seven-month high and stronger economic growth reduced the need for monetary stimulus.

The central bank reiterated that it is maintaining a “neutral” stance in monetary policy.

The RBI also kept the reverse repo rate unchanged at 5.75 percent.

Five members of the monetary policy committee voted to keep rates unchanged, with one voting for a 25 bps cut.

RBI’s Monetary Policy Committee (MPC) listed upside risks to inflation and increased its inflation projection marginally for the year. It now expects inflation to range between 4.3 – 4.7 percent in the third and fourth quarters of the current fiscal, and left economic growth forecast unchanged at 6.7 percent.

The MPC decided to keep the policy repo rate on hold. However, keeping in mind the output gap dynamics, the MPC decided to continue with the neutral stance and watch the incoming data carefully. The MPC remains committed to keeping headline inflation close to 4 per cent on a durable basis.

RBI statement

Farm loan waiver, partial roll back of duty on fuel, cut in GST rates on several items may result in fiscal slippage, RBI said.

A Reuters poll had predicted the repo rate would be left unchanged at the lowest since November 2010 for a second meeting in a row.

(With inputs from Reuters)

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