Monetary policy review: RBI keeps repo rate unchanged at 6.5%

Monetary policy review RBI keeps repo rate unchanged at 6.5

The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 6.5 per cent in its December policy review. Treasury heads of 10 banks surveyed by Mint said the RBI repo rate would be maintained at 6.5% and the policy stance would remain "calibrated tightening".

In its October policy, the monetary policy committee had pegged inflation at 4% for the second quarter of FY19, 3.9-4.5% for the second half of the fiscal and 4.8% for the first quarter of the next fiscal, with risks to the upside. That apart, crude oil prices have slipped 25% to below $60 a barrel since the beginning of October.

While the Statutory Liquidity Ratio now remains unchanged at 19.5%, the RBI has said it will be gradually reduced to 18% over the next six quarters.

Since embarking on a tightening cycle in June, the RBI has raised its policy repo rate by 50 basis points, with the last increase to 6.50 percent made in August.

"The monetary policy completely evaluated current and evolving macroeconomic conditions and voted today to maintain status quo while reiterating its commitment to achieving the medium-term target for headline inflation at 4 percent on a durable basis", RBI governor Urjit Patel said in the press conference.

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The monetary policy committee maintained the policy stance to "calibrated tightening".

The three-day meeting of the Monetary Policy Committee (MPC) meeting started on December 3.

The RBI maintained the GDP growth forecast for the financial year at 7.4 percent. It noted that although Q2 growth was lower than that projected in the October policy, GDP growth in H1 has been broadly along the line in the April policy.

Expert committee for MSMEs: MSMEs play a key role in the economy but they remain vulnerable to structural and cyclical shocks, given their predominantly informal nature.

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