India's Central Bank Maintains Status Quo
05 Avril 2018 - 10:33AM
RTTF2
India's central bank kept its key interest rates unchanged for
the fourth straight meeting, on Thursday, and downgraded its
inflation projections
At the first bi-monthly monetary policy session, the Monetary
Policy Committee of the Reserve Bank of India decided to hold the
repo rate at 6.00 percent, the lowest since 2010.
The reverse repo rate was retained at 5.75 percent. The bank had
lowered the rates by 25 basis points at its meeting in August
2017.
Five members including Governor Urjit Patel voted to keep rates
on hold, while Michael Patra sought a quarter point rate hike. The
MPC reiterated its commitment to keep headline inflation at 4
percent.
The central bank also slapped a ban on banks from providing
services to cryptocurrency investors. Further, the bank asked banks
to end their existing relationship with individuals and firms
dealing in cryptocurrencies within three months.
On the growth front, the bank said several factors are expected
to accelerate the pace of economic activity in 2018-19.
Citing revival in investment activity and global demand, GDP
growth is projected to strengthen to 7.4 percent in 2018-19 - in
the range of 7.3-7.4 percent in the first half and 7.3-7.6 percent
in the second half. The economy had expanded 6.6 percent in
2017-2018.
The bank revised down its inflation forecast for the first half
of 2018-19 to 4.7-5.1 percent from 5.1-5.6 percent and the outlook
for the second half to 4.4 percent from 4.5-4.6 percent.
According to the RBI, food inflation should remain under check
on the assumption of a normal monsoon and effective supply
management. On current assessment, domestic demand is expected to
strengthen during the course of the year.
With growth strengthening and core price pressures rising,
Shilan Shah at Capital Economics, said policy tightening will
commence in the second half of this year. The repo rate will be
hiked by 75 basis point to 6.75 percent over the next 12 months,
the economist said.
The central bank cautioned that rising trade protectionism and
financial market volatility could derail the ongoing global
recovery.
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