Mumbai, December 6: Eyeing rising retail inflation, the Reserve Bank of India (RBI) kept its key policy rate unchanged at 6.00% in its fifth bi-monthly monetary policy review on Wednesday. The apex bank decides to keep reverse repo rate remains at 5.75% and bank rate at 6.25%.
"Despite recent increase in prices of vegetables, some seasonal moderation is expected in near months as winter arrivals kick in. Prices of pulses have continued to show a downward bias. The GST Council in its last meeting has brought several retail goods and services to lower tax brackets, which should translate into lower retail prices, going forward," the statement said.
"Implementation of farm loan waivers by select states, partial roll back of excise duty and VAT in the case of petroleum products, and decrease in revenue on account of reduction in GST rates for several goods and services may result in fiscal slippage with attendant implications for inflation," the statement says.
The six member monetary policy committee, headed by new RBI governor Urjit Patel, was of the view that the moderation in price trends have persisted long enough to warrant lower loan costs, necessary to engineer a quick industrial turnaround and goad people to spend more.
The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.
In its October review, the MPC had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 percent for the current fiscal. The Reserve Bank of India had reduced the benchmark lending rate by 0.25 percentage points to 6 percent in August, bringing it to a 6-year low.