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  Business   Economy  08 Feb 2017  RBI's neutral policy keeps repo rate unchanged

RBI's neutral policy keeps repo rate unchanged

Published : Feb 8, 2017, 2:53 pm IST
Updated : Feb 8, 2017, 3:14 pm IST

Mint Street retaining 6.25 per cent repo rate not in line with wide expectations of monetary easing.

RBI governor Urjit Patel
 RBI governor Urjit Patel

Mumbai: The Reserve Bank of India on Wednesday kept repo rate, its benchmark lending parameter, unchanged at 6.25 per cent. With this, the reverse repo rate stands unchanged at 5.75 per cent.

RBI's decision of status quo was not in line with wide expectations of a rate cut that the industry and other stakeholders had hoped for. However, governor Urjit Patel told the media persons that he still hoped the repo rate will come down.


"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17," RBI said.

The central bank has set the medium-term target of 4 per cent inflation within a band of +/- 2 per cent, while supporting growth.

The Mint Street through the status quo has sent out strong signal that it still waited for an economic environment conducive for a rate cut.

The central bank has lowered GDP growth forecast for this fiscal to 6.9 per cent and expects a rebound to 7.4 per cent next year.  It has also changed its policy stance from 'accommodative' to 'neutral'.


Apart from that the bankers' bank has said that it continues to see retail inflation at 5 per cent for March 2016 - April 2017 period.

Wednesday's was RBI's third policy decision taken by rate-setting Monetary Policy Committee set up on the lines of Federal Open Market Committee (FOMC) in the US since its inception in October 2016.

The central bank had cut repo in its October policy meet by 25 basis points to 6.25 per cent, since then it has not changed the short term lending rate. October's policy stance was Urjit Patel's first rate measure as governor of the central bank.

Up till its last rate cut in October 2016, RBI had cut repo rate by 175 basis points or 1.75 per cent since January 2015 when Raguram Rajan was governor.


Tags: reserve bank of india, rate cut, repo rate, urjit patel