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.

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



Comments are closed.