RBI holds rates on inflation risk

RBI holds rates on inflation risk

Context:

• The Reserve Bank of India’s monetary policy committee on Wednesday decided to maintain status quo on the policy repo rate as it saw inflationary pressure building up in the economy.

Key rates unchanged:

• The Monetary Policy Committee (MPC) was headed by RBI Governor Urjit Patel
• The repo rate remains at 6.0%, the reverse repo at 5.75% and the bank rate at 6.25%.
• The marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.
• The GVA (gross value added) growth for 2018-19 has been projected at 7.2 per cent .

RBI’s forecast:

• The RBI projected retail inflation in the range of 5.1-5.6% for the first half of 2018-19.
• The RBI pared its 2017-18 GVA growth estimate to 6.6%, and forecast that the pace would quicken to 7.2% in the next fiscal year.
• The RBI has forecast consumer price index inflation to be in the 5.1-5.6 percent range during April-September 2018, and 4.5-4.6 per cent during October 2018-March 2019, with risks tilted to the upside.
• RBI projected an inflation range of 5.1-5.6% in the first half of the next fiscal year.

Rationale behind this decision :

• The RBI kept the rates unchanged because inflationary pressure building up in the economy.