RBI Holds Key Repo Rate at 6.5%

The MPC, in its policy review meeting, had retained the key repo rate at 6.5 percent, reiterating willingness to act against inflation….reports Asian Lite News

A majority of the members of the RBI’s Monetary Policy Committee (MPC) are of the view that the central bank’s policy needs to remain actively disinflationary as headline inflation is ruling above the tolerance band and its alignment with the target is getting interrupted, the minutes of the last meeting released on Friday showed.

The MPC, in its policy review meeting, had retained the key repo rate at 6.5 percent, reiterating willingness to act against inflation.

“Going forward, inflation outlook continues to be beset with uncertainties, especially from adverse weather events, the playout of El Nino conditions, uncertainties in global food and energy prices and volatility in global financial markets,” RBI Governor Shaktikanta Das was quoted as saying in the minutes of the October meeting ahead of the monetary policy announcement.

“Inflation prints for September and October will need to be monitored carefully to look out for the moderation that our projections anticipate,” RBI Deputy Governor Michael Debabrata Patra said.

In September, India’s headline retail inflation rate fell to 5.02 per cent in September, mainly because of the sharp fall in vegetable prices.

But clearly the MPC members are of the view that situation needs to kept under close watch.

The RBI Governor said on Friday at a conclave in Delhi that “We remain extra vigilant on inflation dynamics as the outlook on food inflation is beset with uncertainties”.

The central bank faces the challenge of maintaining a delicate balance between promoting growth and controlling inflation with the potential for conflicts between the two objectives.

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