Reserve Bank of India keeps interest rates unchanged

Reserve Bank of India keeps interest rates unchanged

Reserve Bank of India keeps interest rates unchanged

The reverse repo rate also remains the same at 5.76 per cent. This is expected to move up 5.6 in the first half of the next fiscal.

In keeping the rate at 6.00 percent for a third straight policy meeting, as widely expected, the RBI sought to perform a delicate balancing act.

According to RBI MPC, there is a high risk of inflation, which leads to the monetary conditions tight.

Repo rate is the rate at which the central bank of a country lends money to commercial banks against securities in the event of any shortfall of funds.

The mini crisis in 2013, which saw the fiscal deficit rise to 4.9% and the current account deficit touch 4.8% of the gross domestic product, was partly attributed to RBI governor D Subbarao for not hiking interest rates as aggressively as possible and staying behind the inflation curve. Similarly, the central bank will decrease the repo rate in case of a deflationary environment. It said the fiscal slippage has broader macro-financial implications on economy-wide borrowing costs, which have already started rising.

On the deficit target, Patel warned that any major deviation would make meeting inflation targets challenging.

There is "need for vigilance around the evolving inflation scenario in the coming months", the RBI said.

In December, the committee raised its inflation forecast to 4.3-4.7% for the second half of the financial year ending March, up from the projected 4.2-4.6%.

Not amongst top 25, but improved rankings
The top-most Indian centre of higher learning was the Indian Institute of Science (IISc), Bengaluru, at the 29th place. Its only area of downfall was teaching reputation.

During the policy announcement, Patel said that increased focus on the rural economy in the Union Budget 2018 a welcome step.

Retail inflation for the month of November'17 breached the medium-term target of 4% set by the central bank. One basis point is a hundredth of a percentage point.

Elaborating on the upside risks to inflation, the RBI listed half a dozen factors.

Shashank Mendiratta, economist at ANZ, said the fiscal stance for 2018-2019 "will add to the hawkish rhetoric on two counts - the budgetary decision to allow aggregate spending to rise at a faster pace than nominal GDP; and the decision to effect an increase in minimum support prices".

"They remain optimistic on growth, expecting FY19 to head back toward 7 percent".

"The MPC has adopted a wait and watch policy so far as growth-inflation dynamics are concerned".

The RBI has kept the repo rate unchanged since a 25 bps cut in August, having taken advantage of a period of extraordinary low inflation to cut rates by 200 bps since early 2015.

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