RBI keeps repo rate unchanged at 6.5%

New Delhi: Contrary to market expectations, the Reserve Bank of India on Friday left the key interest rates unchanged at its fourth bi-monthly monetary policy on Friday. The Central Bank has however, changed the policy stance to “calibrated tightening” from “neutral”.

Five out of the six-member Monetary Policy Committee (MPC) voted in favour of keeping the repo rate unchanged at 6.50 percent and the reverse repo rate at 6.25 percent. The MPC headed by RBI Governor Urjit Patel said that the recent excise duty cut by the government on petrol and diesel will help contain inflation.

Analysts and experts widely expected the RBI to take a hawkish stance as the country grapples with inflationary pressures, weakening rupee, surging oil prices and market volatility sparked by a major non-bank finance firm`s defaults.

RBI’s rate pause comes as a huge surprise for the market analysts even as the rupee crashed to a historic low by breaching 74-level against the dollar due to the twin-impact of capital outflows triggered by surging US Treasury yields and crude oil prices racing to a four-year high.

Although, to stem the rupee fall, the RBI Wednesday allowed oil companies to access foreign capital of USD 10 billion on a long-term basis to finance their working capital requirements. Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year’s largest weekly build in US crude stockpiles.

RBI retained GDP growth estimate at 7.4 percent for FY19 and it will go up to 7.6 percent in FY20. Headline inflation is estimated to accelerate to 4.5 percent by March 2019 quarter with upside risks, RBI said.

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Source:Zee news

RBI