Reserve Bank of India Keeps Repo Rate at 6.25% with a Neutral Forward Bias
April 6, 2017
This was was the third straight meeting that left the repo rate at 6.25%. That interest rate had been cut twice last year by 25 basis points each in April and October, following four reductions totaling 125 bps in 2015. At a meeting in December, the reverse repo rate had been cut to its present 5.75% level, and in a more meaningful move, forward guidance changed the overall bias of policy from accommodative to a stance of neutrality. Neutrality was retained after this month’s first bi-monthly review in fiscal 2017-2018. The decision was agreed upon unanimously, according to a released statement.
Inflation has been quiescent. Headline CPI inflation is set to undershoot the target of 5.0 per cent for Q4 of 2016-17 in view of the sub-4 per cent readings for January and February. For 2017-18, inflation is projected to average 4.5 per cent in the first half of the year and 5 per cent in the second half (Chart 1). 16. Risks are evenly balanced around the inflation trajectory at the current juncture. There are upside risks to the baseline projection.
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Tags: Reserve Bank of India