RBI likely to keep rates unchanged in bimonthly policy meeting

RBI likely to keep rates unchanged in bimonthly policy meeting

Agency News

New Delhi, Feb 5 : The Reserve Bank of India is likely to keep repo rates unchanged at 5.15 per cent at its bimonthly policy meeting on Thursday, as the country battles rising inflation and slowing economy. The central bank’s Monetary Policy Committee (MPC) which began its last meeting for the current fiscal on Tuesday will announce its decision on its key lending rates -- repo rate and the reverse repo -- on Thursday.

Last year, the central bank aggressively cut rates by a total of 135 basis points in an eight-month period, before pausing in December against the backdrop of a spike in prices of essential food items. Retail inflation rose to five-year high of 7.35 per cent in December from 5.54 per cent a month ago, limiting the scope for a rate cut to boost growth.

The central bank expects food inflation to remain high in the next six months. The RBI’s medium-term inflation target is 4 per cent. RBI Governor Shaktikanta Das last month hinted at a pause in interest rate cuts saying that monetary policy has its own limits and suggested structural reforms and fiscal measures to boost demand up and growth in the economy.

In the December monetary policy committee meeting minutes, Das said that it is imperative that monetary and fiscal policies work in close coordination. He said that the RBI would await the measures that the government may initiate in its budget. The government raised the fiscal deficit target for 2019-20 to 3.8 per cent from the previous target of 3.3 per cent. (UNI)