Published: Sat, April 07, 2018
Money | By Hannah Jacobs

RBI maintains repo rate of 6%, predicts inflation to cool in FY19

RBI maintains repo rate of 6%, predicts inflation to cool in FY19

Following decline in vegetable prices and significant moderation in fuel group inflation, the RBI lowered inflation projection in the fiscal year 2018-19 in its latest monetary policy review.

Consequently, the reverse repo rate under the LAF remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.

Five members of the panel, including the RBI Governor, voted for a status quo while executive director Michael Patra was the lone member who wanted the key rate to be hiked by 25 basis points. However, the RBI doesn't want to disturb the interest rates immediately despite recent polls recording the lowest retail inflation rate in February, for the first time in four months.

The MPC sharply trimmed its April-September inflation projection to 4.7-5.1 percent, from a previous range of 5.1-5.6 percent that it released in February.

In the first bi-monthly policy for 2018-19, the central bank said that GDP is projected to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in the current fiscal. On the global outlook, Patel said there is a considerable amount of risk from rising oil prices and other indicators such as fears of a trade war.

There are also risks to inflation from fiscal slippages at the level of states on account of higher committed revenue expenditure, he said.

"We don't anticipate a change in the repo rate, or stance of monetary policy until greater clarity emerges towards the second half of the year on the impact of minimum (crop) support prices and monsoon on the inflation trajectory", said Aditi Nayar, the principal economist of rating agency ICRA.

Mumbai:RBI has set up a panel to explore the introduction of its own "fiat" digital currency. Second, the uncertainty over the pace and timing of monetary policy normalisation by the central banks in advanced economies which may have an adverse impact on capital flows and overall investment sentiment. Also, policymakers appear to have glossed over the RBI's March survey of households' inflation expectations - where prices are seen edging up over the three-month and one-year-ahead horizons - as well as feedback that manufacturers expect input and output prices to rise.

After hitting a peak in January this year, Bitcoin price has plunged to almost a one-third of the peak value, and the altcoins are not holding much better either.

However, while briefing the media, RBI Governor Urjit Patel listed financial market volatility and trade war fear as risks.

Since then banks have been trying to make blockchain work, and for that, it would need some cryptocurrency: Lakshmi.

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