India Maintains Key Interest Rates
February 07 2018 - 1:18AM
RTTF2
India's central bank kept its key interest rates unchanged for
the third straight meeting and cautioned about risks to inflation
outlook from fiscal slippage.
At the sixth bi-monthly monetary policy session on Wednesday,
the Monetary Policy Committee of the Reserve Bank of India decided
to hold the repo rate and continue with the neutral stance.
The repo rate was retained at 6.00 percent, the lowest since
2010, and the reverse repo rate at 5.75 percent. The bank had
lowered the rates by 25 basis points at its meeting in August
2017.
Five members including Governor Urjit Patel voted in favor of
the monetary policy decision, while hawkish member Michael Patra
sought a 25 basis point hike.
Policymakers reiterated that they are committed to keep headline
inflation close to 4 percent.
Inflation was estimated at 5.1 percent for the January to March
period and to accelerate to 5.1-5.6 percent in the first half of
fiscal year 2018-19. In the second half, inflation was seen at
4.5-4.6 percent, with risks tilted to the upside.
"...fiscal slippage as indicated in the Union Budget could
impinge on the inflation outlook," the bank said. There is need for
vigilance around the evolving inflation scenario in the coming
months.
Further, the committee assessed that the nascent recovery needs
to be carefully nurtured and growth put on a sustainably higher
path.
The central bank forecast GVA growth for 2017-18 at 6.6 percent,
instead of 6.7 percent projected in December.
Growth for the fiscal year 2018-19 was estimated at 7.2 percent
- in the range of 7.3-7.4 percent in the first half and 7.1-7.2
percent in the second half.
Shilan Shah, an economist at Capital Economics, said the RBI
will be wary of choking off the recovery too early, but with core
price pressures rising, policy tightening is likely in the second
half of 2018.
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