Published: Wed, December 06, 2017
Science | By Hubert Green

RBI leaves interest rate unchanged at 6 per cent

RBI leaves interest rate unchanged at 6 per cent

The RBI has also left the reverse repo rate under the LAF unchanged at 5.75 per cent and marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.

Mumbai: In its penultimate monetary policy review of the fiscal, the Reserve Bank of India (RBI) on Wednesday maintained status quo on its key lending rates citing concerns over the rising trajectory of inflation.

Similarly, the NSE Nifty was trading lower by 78.70 points, or 0.77 per cent, at 10,039.55. The primary reason behind no change in policy rates reflects the Reserve Bank of India's focus on inflation control.

Experts agree that inflationary pressure and GDP growth in Q2 could convince the RBI to maintain its current interest rates.

The RBI in August cut the main interest rate by 25 basis points to 6.0 per cent, the lowest level since September 2010.

Another source of RBI discomfort is that core inflation, which excludes food and energy prices, has remained stubbornly high at around 4.5 per cent. It noted that food and fuel price-gains edged up in November, input costs are rising and risks to government revenue could stoke inflation, as could any global financial instability.

The next monetary policy meeting will be held in February 6, next year. In October, it kept the rates unchanged.

The RBI's course will likely be determined by inflation, which in October it projected would accelerate to 4.2 to 4.6 percent in the six months to March, driven by multiple factors including planned pay hikes for government employees.

The Indian economic growth recovered to 6.3 percent year-on-year in the third quarter from the previous quarter's 5.7 percent growth, slightly coming below the market projection of 6.4 percent.

"Against this backdrop, we expect the RBI to refrain from further rate cuts this week and for rest of FY18", said Radhika Rao, India economist at DBS Bank.

The RBI said in a statement the decision was consistent with its objective of keeping inflation at around four percent, noting that consumer price inflation hit a seven-month high recently.

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