Central bank keeps repo rate unchanged at 6%, reverse repo rate unchanged at 5.75%

Mumbai :The Reserve Bank of India in its monetary policy on Wednesday kept repo rates unchanged at 6 per cent, and the reverse repo rate unchanged at 5.75 per cent. The RBI, in its policy statement, has lowered economic growth projection to 6.6 per cent for 2017-18, from 6.7 per cent. It has estimated 7.2 per cent growth in the next fiscal.
The central bank said GST was stabilising, and that economic activity was picking up adding that there are early signs of investment revival. It also said that the exact magnitude of MSP rise on inflation cannot be fully assessed at this stage.
The RBI attributed volatility in financial markets to uncertainty over the pace of normalisation of the US Fed monetary policy.
Experts, in a survey conducted earlier, expected the RBI to keep rates unchanged. Crude oil prices have already touched $70 per barrel, bond yields are rising globally and stock markets are now skittish. Banks, led by State Bank of India, have already raised bulk deposit rates by up to 140 basis points.
“If the MSP increases are much larger, they could feed into higher inflation and increase the chances of a tighter monetary policy. We will closely watch the decision on MSP to assess the impact on our inflation and monetary policy outlook. For now, we expect a prolonged pause on monetary policy including at the upcoming February 7 policy meeting, although the RBI may flag upside risks to inflation,” Nomura group said in a note.