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India’s central bank keeps repo rate at 6.00 percent, stance stays ‘neutral’

Published: February 7, 2018

STORY: The Reserve Bank of India (RBI) on Wednesday (February 07) kept its main repo rate on hold at 6.0 percent for a third consecutive policy meeting and retained its “neutral” bias, warning it would closely monitor accelerating inflation but also saying economic growth needs to be nurtured.

Five members of the monetary policy committee (MPC) voted to keep rates unchanged, with one member, RBI Executive Director Michael Patra, voting for a 25 basis points hike. The reverse repo rate was held at 5.75 percent.

The decision came after surging oil and food prices pushed India’s annual consumer inflation to a 17-month high of 5.21 percent in December – well above the RBI’s 4 percent target. Inflation is expected to accelerate further after the government’s budget last week widened its fiscal deficit target for the fiscal year starting in April to help finance a sharp increase in spending on rural areas and healthcare.

The RBI said it expected an annual inflation rate of 5.1 percent in the January-March quarter, and would likely accelerate to 5.1 to 5.6 percent in the first half of the fiscal year starting in April over factors such as higher crude prices, and said risks were “tilted to the upside”.




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