Mumbai, February 6: Eyeing rising retail inflation, the Reserve Bank of India (RBI) kept its key policy rate unchanged at 6.00% in its sixth bi-monthly monetary policy review on Wednesday. Also, the RBI has lowered economic growth projection to 6.6 percent for 2017-18, from 6.7 percent.
The RBI said it expected an annual inflation rate of 5.1 percent in the January-March quarter, and would likely accelerate to 5.1 to 5.6 percent in the first half of the fiscal year starting in April over factors such as higher crude prices.
Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, began its two-day deliberations. The MPC expects the vegetable prices to moderate in the near term and pulses are already on the downtrend.
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.
It may toughen its warning against inflation, after prices accelerated at the fastest pace in last 17 months. The Bank is also worried about higher global crude prices. In its December review, the MPC had kept the benchmark interest rate unchanged on concerns of a possible price rise but had left the door ajar for a rate cut in future.
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.