RBI keeps repo rate unchanged at 6 per cent, raises inflation forecast

Mumbai: Reserve Bank of India (RBI) on Wednesday kept the key interest rate unchanged, on the expected lines, but raised the inflation forecast for remainder of the current financial year to 4.3-4.7 per cent.

The 6-member Monetary Policy Committee (MPC), headed by Reserve Bank of India Governor Urjit Patel, in its fifth bi-monthly review, kept repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent.

It said the reason for the decision was “achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth”.

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

RBI Governor Urjit Patel-headed Monetary Policy Committee started two-day deliberations on Tuesday amid several experts saying that the central bank is unlikely to lower the key interest rate and will stay focused on controlling inflation.

The Reserve Bank of India had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low. Bankers and experts are of the view that for the second time in a row it may keep the repo-rate or short term lending rate unchanged as inflation trajectory is likely to remain upward in the coming months.

“It’s going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation,” Union Bank MD and CEO Rajkiran Rai G said.

The meeting is taking place at a time when the wholesale prices based inflation in October shot up to a 6-month high of 3.59 per cent. The retail inflation (Consumer Price Index) for October rose to a 7-month high of 3.58 per cent.