Reserve Bank of India

February 7, 2018

India’s Monetary Policy Committee maintained its existing rate structure including a 6.0% repo rate after its first scheduled review of 2018. It did this despite a 5.2% inflation rate at end-2017, which is well above the target center of 4.0%. Official felt compelled to revised projected inflation in the first half of the fiscal year that starts in April to 5.1-5.6%. According to a released statement, inflation will be in the mid-4% range subsequently, but far more upside inflation risks are mentioned compared to a few cited mitigating downside factors. Committee members are trying to balance a perceived need to nurture growth, which has not been as strong as hoped, with vigilance in securing price stability, lest the central bank’s credibility as an inflation fighter be eroded. The repo rate was last changed in August 2017 via a cut of 25 basisĀ  points that brought the cumulative reduction since 2015 to two percentage points.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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