RBI monetary policy: Rates unchanged, Urjit Patel says recent reforms will help pick up growth

The RBI had cut its key lending rate to a six-and-half-year low in August, giving banks the elbow room to reduce EMIs on home and car loans and lend more money to businesses.

 

Agencies

The Reserve Bank of India kept its key interest rate unchanged at 6% for the second time in a row on Wednesday, staying focused on controlling inflation that accelerated to a seven-month high in October.

In its October review, the Monetary Policy Committee had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7% for the current fiscal. The repo rate is the rate at which the RBI lends to banks.

On Wednesday, 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%.

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

“The recent reforms undertaken will help pick up the rate of growth,” RBI governor Urjit Patel said.

The RBI had cut its key lending rate to a six-and-half-year low in August, giving banks the elbow room to reduce EMIs on home and car loans and lend more money to businesses.

The outcome of the two-day MPC meeting was being keenly awaited by stakeholders including the industry and stock markets.

The meeting took place at a time when the wholesale prices based inflation in October shot up to a six-month high of 3.59%. The retail inflation (Consumer Price Index) for October rose to a seven-month high of 3.58%.

Reversing a five-quarter slide, the Indian economy bounced back from a three-year low with the GDP expanding by 6.3% in the July-September period, as manufacturing revved up and businesses adjusted to the new GST tax regime.

The GDP growth in the second quarter of 2017-18 was higher than 5.7% in the preceding April-June period.

 

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