RBI keeps repo rates unchanged at 6%; stance neutral

RBI keeps repo rates unchanged at 6%; stance neutral
Feb 2018 , by , in Latest News

Given the concerns on the rising inflation, surging global crude oil prices and fiscal slippage, the Reserve Bank of India on Wednesday kept the repo rate “unchanged” at 6% in its latest credit and monetary policy review. However, the central bank maintained the neutral stance of monetary policy, which means future calls on rate direction would be data-driven and in either direction.

“The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of 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 RBI said in a statement.

The Monetary Policy Committee pegged CPI inflation in the range of 5.1-5.6 per cent for the H1FY19, factoring in the diminishing statistical HRA impact of central government employees. It projected 4.5-4.6 per cent in H2FY19, with risks tilted to the upside. The projected moderation in inflation in the second half is on account of strong favourable base effects, including unwinding of the 7th CPC’s HRA impact, and a softer food inflation forecast, given the assumption of normal monsoon and effective supply management by the government, the policy statement said.

Justifying the Reserve Bank of India’s stance of keeping the repo rate unchanged considering that the rising inflation, Mr. Anuj Puri, Chairman – ANAROCK Property Consultants said, “We believe that the interest rates will soon start inching upwards, which is already being factored into the rising bond yields for the past few months. The real estate sector can and should look at the long-term economic prospects and implications on which the monetary policy decisions are based, as these will dictate the growth trajectory for the sector.”

The status quo on policy rates by RBI was on the lines of expectations. Projecting it earlier, Joe Verghese, Managing Director, Colliers International India had said, “After getting completely missed out from the budget, the real estate industry is also unlikely to get any relief in the form of interest cuts from the RBI currently more concerned about the risk of rising inflation and global uncertainties”.

 

 

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