RBI keeps repo rate, reverse repo rate unchanged

RBI keeps repo rate, reverse repo rate unchanged

The Reserve Bank of India (RBI) on Wednesday kept its key lending rate-the repo rate-unchanged at 6%, dashing hopes of lower borrowing costs for households and the companies ahead of the festival season.

The Reserve Bank of India (RBI) said the benchmark repo rate would remain unchanged.

The bank reduced the statutory liquidity ratio by 50 basis points to 19.50 percent.

All but three of the 60 analysts polled by Reuters had expected RBI to keep the repo rate steady.

Experts say it is likely to spur economic growth in the long run but has posed an initial shock to the economy as businesses adjust. The MPC has also reiterated the need to support investment activity and the gamut of measures that are being undertaken by government will help this process significantly.

However, the telltale signs of weakness in the macro-economic indicators tied the hands of the MPC to maintain status quo on policy rates, even though inflation seems to be pretty under control. Further policy action will be contingent on the evolution of the output gap and its impact on the inflation trajectory.

When specifically asked whether rising inflation meant that the possibility of an interest rate cut in coming cycles had come to an end, Patel said: "The MPC is watching all the available data very closely".


"I think government and the central bank is in sync".

The policy was more or less along expected lines. The rates like cash rate, repo rate, reverse repo rate, etc., while managing money supply and controlling inflation, also hold a key to interest rates on retail loans like home loan, auto and vehicle loans.

All the major global rating agencies have placed the country rating at 'BBB-', which is just one notch above the junk grade, although with a stable outlook. Besides liquidity with the banks, the lending rates on retail loans are also a function of the cost of funds of the banks. This can be used for LCR purposes. "Such juxtaposition of risks to inflation needs to be carefully managed", the apex bank noted.

The RBI, in August, had pegged growth at 7.3 per cent for 2017-18 on a GVA basis.

The government sees the decline in growth as a hiccup and expects the economy to pick up pace in the second half of the year as teething troubles with GST get resolved and the effect of demonetisation wanes.

"We believe that RBI will stay on status quo for the rest of the year". I expect domestic disinflationary impulses like subdued capacity utilization, proactive food price management, and rationalization of fuel tax rates to have an offsetting effect.

Total area under cultivation declined by 0.7% to 1049.42 lakh hectares as of September 15, 2017 compared with corresponding period previous year, with particularly sharp reductions in oilseeds (-8.8%) and pulses (-3.5%) on account of uneven geographic spread of monsoons as well as deviations in the month-wise distribution of rainfall compared with the long period average.

Related:

Comments

Latest news

Kimberly-Clark Corporation (NYSE:KMB) Dips Under Moving Averages
Following the transaction, the senior vice president now directly owns 5,364 shares of the company's stock, valued at $696,354.48. The value of the investment in (KMB) increased from $1,244,000 to $1,245,000,000 increasing 99,980.4% for the reporting period.

The Charles Schwab Corporation (NYSE:SCHW): Detailed technical analysis and trading indicators
After $0.39 actual EPS reported by Charles Schwab Corp for the previous quarter, Wall Street now forecasts 5.13% EPS growth. Bowling Portfolio Management Llc bought 14,152 shares as the company's stock declined 10.32% while stock markets rallied.

Trump slams Las Vegas shooting as 'act of pure evil'
Gun silencers would make it harder for police to identify a mass shooter in a crowd. Yesterday's attack will likely delay, but not permanently stop, that vote.

Newcastle United chiefs meet with financier Amanda Staveley as takeover talks intensify
The 44-year-old has twice previously tried to purchase Liverpool , with the latest bid coming last summer. The businesswoman has £28bn under her management, and is well known amongst leaders in the middle East.

FIL Ltd Acquires 531533 Shares of PayPal Holdings, Inc. (PYPL)
Over a month, it has seen its stock price volatility to stay at 1.25% while shortening the period to a week, volatility was 1.68%. First Personal Financial Services increased its position in shares of PayPal Holdings by 73.4% during the first quarter.

Other news