RBI maintains status quo on repo rate

GDP growth for 2019-20 revised to 5.0% from 6.1% in Oct

Inflation has increased sharply in November and may stay high for some time, says Shaktikanta Das.

AMN

The Reserve Bank of India (RBI), on December 5, left the repo rate unchanged in its December policy review while maintaining the accommodative stance as it expected past monetary easing and measures taken by the government to feed into the real economy gradually.

The GDP growth for 2019-20 is revised downwards from 6.1 per cent in the October policy to 5.0 per cent. The CPI inflation projection is revised upwards to 5.1-4.7 per cent for H2:2019-20 and 4.0-3.8 per cent for H1:2020-21.

“Will continue to maintain accommodative stance,” said the Monetary Policy Committee (MPC).

All six members voted in favour of a pause, the central bank said in a statement on December 5.

RBI revised its inflation outlook upwards and said that it will monitor incoming data for clarity on inflation. The central bank also cut its growth outlook from 6.1 per cent in the October policy to 5 per cent for the current financial year.

RBI Monetary Policy Live: MPC keeps repo rate unchanged at 5.15 per cent

“The MPC recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture,” the central bank said. This is the first pause after five consecutive rate cuts by the MPC since February. The policy rate was lowered by 135 basis points between February-October 2019.

Fifth Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

RBI said that the decisions were in line with the Monetary Policy Committee’s (MPC) objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 (+/- 2) per cent, while supporting growth.

“The MPC notes that economic activity has weakened further and the output gap remains negative. However, several measures already initiated by the Government and the monetary easing undertaken by the Reserve Bank since February 2019 are gradually expected to further feed into the real economy,” the RBI added.