Reserve Bank of India

June 7, 2017

For a fourth straight Monetary Policy Committee meeting, the key repo interest rates in India was kept at 6.25%. Such had been reduced by 125 basis points in 2015 and by a further 25 basis points in April and October of 2016. The Reserve Bank of India has a medium-term inflation target of 4.0%, and this latest meeting focused upon a sharp slowdown of inflationary momentum during April and whether such proves transitory or not. According to a released statement, officials until proven otherwise are assuming the latter and taking a cautious approach:

Noting that inflation has fallen below 4 per cent only since November 2016, the MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis keeping in mind the output gap. The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place. Premature action at this stage risks disruptive policy reversals later and the loss of credibility. Accordingly, the MPC decided to keep the policy rate unchanged with a neutral stance and remain watchful of incoming data.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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