The Reserve Bank of India kept its key interest rate unchanged at 6% for the second time in a row on Wednesday, staying focused on controlling inflation that accelerated to a seven-month high in October.
In its October review, the Monetary Policy Committee had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7% for the current fiscal. The repo rate is the rate at which the RBI lends to banks.
On Wednesday, the central bank reiterated that it is maintaining a “neutral” stance in monetary policy. The RBI also kept the reverse repo rate unchanged at 5.75%.
Five members of the monetary policy committee voted to keep rates unchanged, with one voting for a 25 bps cut.
“The recent reforms undertaken will help pick up the rate of growth,” RBI governor Urjit Patel said.
The RBI had cut its key lending rate to a six-and-half-year low in August, giving banks the elbow room to reduce EMIs on home and car loans and lend more money to businesses.
The outcome of the two-day MPC meeting was being keenly awaited by stakeholders including the industry and stock markets.
{{/usCountry}}The outcome of the two-day MPC meeting was being keenly awaited by stakeholders including the industry and stock markets.
{{/usCountry}}The meeting took place at a time when the wholesale prices based inflation in October shot up to a six-month high of 3.59%. The retail inflation (Consumer Price Index) for October rose to a seven-month high of 3.58%.
Reversing a five-quarter slide, the Indian economy bounced back from a three-year low with the GDP expanding by 6.3% in the July-September period, as manufacturing revved up and businesses adjusted to the new GST tax regime.
The GDP growth in the second quarter of 2017-18 was higher than 5.7% in the preceding April-June period.