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Reserve Bank of India keeps repo rate at 6% on inflation fears

08/02/2018


Reserve Bank of India keeps repo rate at 6% on inflation fears

MUMBAI -- The Reserve Bank of India held the repo rate steady on Wednesday despite the government wanting it lowered, as retail inflation is close to the bank's upper limit.


The six-member Monetary Policy Committee, headed by RBI Governor Urjit Patel, kept the key policy rate at 6% for the third straight review over fears that rising crude oil prices could further stoke inflation.

The government's announcement of increasing the minimum support price for crops also raised concerns over food prices rising.

The Reserve Bank of India last reduced the repo rate in August, by 0.25 percentage points.

Retail inflation in December rose to 5.21%, from 4.88% the previous month, driven by increases in the prices of food items. The Reserve Bank has been tasked with keeping inflation at 4%, within plus or minus 2%.

In December, the committee raised its inflation forecast to 4.3-4.7% for the second half of the financial year ending March, up from the projected 4.2-4.6%.

A statement by India's Chief Economic Adviser Arvind Subramanian raised hopes that economic growth could pick up in the second half of the year, further dampening the committee's appetite to tamper with the benchmark lending rate.

Finance Minister Arun Jaitley has pegged India's growth rate at 7.2-7.5% for the second half of this year.

https://asia.nikkei.com/Politics-Economy/Economy/Reserve-Bank-of-India-keeps-repo-rate-at-6-on-inflation-fears

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