RBI holds rates, sees inflation rise

  • The monetary policy committee (MPC) of the Reserve Bank of India decided to keep the repo rate unchanged at 6%, for the second consecutive meeting, while maintaining its neutral stance.
  • This means banks are unlikely to revise their home or car loan rates anytime soon.
  • While observing that moderation in inflation (excluding food and fuel) observed in Q1 of 2017-18 had, ‘by and large’, ‘reversed’, the six-member committee said inflation may continue to accelerate in the near term.
  • The RBI revised its inflation projection to the range of 4.3-4.7% for the last two quarters of the current financial year as compared with the 4.2-4.6% range projected in the last policy meeting held in October.
  • “The recent rise in international crude oil prices may sustain…any adverse supply shock due to geopolitical developments could push prices [up] even further,” the central bank said. Crude oil and food prices drove up retail inflation to 3.58% in October.
  • The MPC’s stance on interest rates was on the expected lines. Except R.H. Dholakia, all the other members of the committee voted to retain status quo. Mr. Dholakia, the most dovish among the members, wanted a 25 basis point rate cut. (100 basis point = 1 percentage point)
  • It (MPC) also decided to persevere with the neutral stance of monetary policy and reiterated its commitment to keep consumer price inflation at 4% while supporting growth, Urjit Patel, governor, RBI, said during the post-policy press conference.


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