RBI Monetary Policy Review: Why key rate was not hiked by Urjit Patel led MPC

Oct 05, 2018, 18:39 PM IST
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The Reserve Bank of India (RBI) announced its fourth bi-monthly monetary policy review statement today, keeping the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent. 

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RBI Policy

RBI Policy

The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) has kept policy rates on hold. This was against the consensus view of analysts and experts.  (Image: Reuters)

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Repo Rate: Status Quo

Repo Rate: Status Quo

Repo rate, therefore, stays at 6.50%. However, the MPC changed its policy stance from "neutral" to "calibrated tightening".  (Image: Reuters)

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MPC votes 5:1

MPC votes 5:1

Five of the six members of the MPC supported the decision to keep rates on hold. Notably, one voted for a 25 bps increase. In the same manner, five of six members voted in favour of change in stance. Why RBI decided to hold the rate - here are the factors:  (Image: Youtube RBI)

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Inflation

Inflation

1) To observe the evolving situation on inflation front (the recent inflation prints were lower than the projections on account of sharp slowdown in food inflation and accordingly, there has been a downward revision to the future inflation trajectory compared with August 1 projections)  (Image: Reuters)

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Liquidity

Liquidity

2) to support liquidity in the system which has come under pressure recently (CRISIL Economy Research) (Image: Youtube RBI)

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