RBI keeps interest rate unchanged, lowers inflation projection

TIL Desk/Business/Mumbai/ The Reserve Bank has kept the key interest rate unchanged but cut its inflation forecast on lower food prices, sparking a rally in the stocks and bond markets. While keeping the benchmark repurchase or repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent for the fourth time straight, the six member Monetary Policy Committee headed by RBI Governor Urjit Patel retained the ‘neutral’ stance.

The MPC trimmed its April-September inflation projection to 4.7-5.1 per cent, from its February forecast of 5.1-5.6 per cent. It raised economic growth target to 7.4 per cent for 2018-19 fiscal from 6.6 per cent of last fiscal “with risks evenly balanced”. Five of the six members of MPC voted for the decision, while one sought a hike.

“Overall food inflation should remain under check on the assumption of a normal monsoon and effective supply management by the government,” Reserve Bank of India said in a statement.

Cutting inflation forecast for second-half was cut to 4.4 per cent from 4.5-4.6 per cent, RBI reiterated commitment to keep inflation at 4 per cent in medium-term. It however warned that rising trade protectionism and financial market volatility could derail global recovery.