RBI keeps repo rate unchanged at 6.25 per cent

New Delhi, Dec 7 (KNN) In a move which could disappoint many who were expecting lower interest rates post demonetization, RBI has kept the repo rate unchanged at 6.25 per cent in its Fifth Bi-monthly Monetary Policy Statement, 2016-17.

In the policy statement, RBI said, “On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent.”

The reverse repo rate under the LAF is too unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

“The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth. The main considerations underlying the decision are set out in the statement below,” RBI said.

Further, RBI said, “In the view of the Committee, this bi-monthly review is set against the backdrop of heightened uncertainty.”

In India, while supply disruptions in the backwash of currency replacement may drag down growth this year, it is important to analyse more information and experience before judging their full effects and their persistence – short-term developments that influence the outlook disproportionately warrant caution with respect to setting the monetary policy stance.

 If the impact is transient as widely expected, growth should rebound strongly. Turning to inflation, food prices other than vegetables are exhibiting sustained firmness and a pick-up in momentum, it said. (KNN Bureau)