The Reserve Bank of India kept its key interest rate unchanged on Thursday after inflation breached its medium-term target for the first time in over a year. RBI kept the policy rate unchanged at 5.15 per cent t and decided to continue with its accommodative stance to support the economy. The Central Bank maintains an accommodative policy stance with a view to reviving growth.
The central bank also revised GDP growth downwards to 5 per cent for 2019-20 from 6.1 per cent projected in its October policy.
"The Monetary Policy Committee recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture," the RBI said in its fifth bi-monthly monetary policy for this fiscal.
RBI cuts GDP growth forecast for the current fiscal to 5 per cent and revised retail inflation projection upwards to 5.1-4.7 pc for the second half of this fiscal.
The panel decided to continue with the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target. All the six members of the MPC voted in favour of a rate pause. The CPI inflation projection is revised upwards to 5.1-4.7 per cent for H2 FY20 and 4-3.8 per cent for H1 FY21. Between February and October 2019, the RBI has reduced repo rate by 135 basis points.
Meanwhile, the 30-share Sensex slipped in the afternoon trade on Thursday, after the central bank RBI maintained the repo rate at 5.15%. The Sensex slumped more than 100 points to 40,749.39 after the decision.
10 Highlights of RBI Monetary Policy Statement:
* Repo rate or short-term lending rate unchanged at 5.15 pc;
* GDP growth forecast lowered for current fiscal to 5 pc from 6.1 pc earlier;
* Various high frequency indicators suggest demand conditions remained weak;
* RBI continues with accommodative monetary stance to revive growth;
* Recognises that there is monetary policy space for future action;
* Retains retail inflation projection for second half of year raised to 5.1-4.7 pc;
* RBI notes monetary transmission to improve going forward;
* Foreign exchange reserves stood at USD 451.7 bn on Dec 3, up USD 38.8 bn over March-end 2019;
* All members of rate-setting Monetary Policy Committee (MPC) voted for rate pause;
* Next monetary policy review meet scheduled during February 4-6, 2020.