RBI keeps repo rate unchanged at 6.5%, lowers inflation forecast sharply

RBI to announce its fifth bi-monthly monetary policy review of the current financial year this afternoon

Monetary policy review: RBI keeps repo rate unchanged at 6.5%

The marginal standing facility (MSF) rate and the Bank Rate stand at 6.75 per cent.

The RBI, however, lowered inflation forecast sharply for the second half (six months) of 2018-19 to 2.7 per cent-3.2 per cent. Excluding food items, inflation has remained sticky and elevated, the statement said. That apart, crude oil prices have slipped 25% to below $60 a barrel since the beginning of October. Currently, SLR stands at 19.5 per cent. SLR refers to the share of bank's total deposit that it needs to maintain itself as liquid assets.

The repo rate is the rate at which the RBI lends short-term money to the banks. Barring large unexpected developments, we expect the RBI to remain in the pause mode for the reminder of FY19.

RBI changed the policy stance to "calibrated tightening" from "neutral", while affirming its commitment to achieve the medium-term objectives to contain price rise.

The Central Bank of the Republic of Turkey (CBRT) will continue to effectively use all policy instruments at hand to maintain price stability in 2019, according to its new fiscal and monetary policy for the new year announced Wednesday.

The six-member MPC, headed by RBI governor Urjit Patel had started its three-day meet on December 3 for the fifth bi-monthly monetary policy review of the current financial year.

The central bank also retained the GDP growth projection for 2018-19 at 7.4 per cent. However, headline inflation, as measured by the consumer price index (CPI), for October came in below RBI estimates at 3.31%.

Tuesday said it would inject Rs 10,000 crore into the system through the purchase of government securities on December 6 to increase liquidity.

SLR is the reserve requirement that the commercial banks in India are required to maintain in the form of cash, gold reserves, government-approved securities before providing credit to the customers. Hence, to address the issue, the committee has made a decision to set up an Expert Committee to identify causes and propose long-term solutions for the economic and financial sustainability of the MSME sector.

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