RBI maintains status quo, keeps repo rate unchanged at 6.5%

RBI maintains status quo, keeps repo rate unchanged at 6.5%

Sujan Hajra, Chief Economist at Anand Rathi Financial Services, said "Calibrated reduction of SLR announced in the policy today is in line with the long-term strategy of the RBI to scale down pre-emption of bank resources by the government without undermining quality of bank balance sheet".

In its last bi-monthly monetary policy, the bank had kept the repo rate unchanged at 6.5 percent.

Not only did the 6-member committee decide to keep the repo rate (the rate at which RBI lends money to banks) unchanged, but also kept its "calibrated tightening" stance in tact.

This is for the second time in a row that the central bank did not tinker with the interest rate.

What could be RBI's likely rate action?

Weaker global oil prices and domestic food prices are expected to drag the headline inflation rate below projections.

Will RBI change its outlook on inflation?

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The six-member MPC, headed by RBI governor Urjit Patel had started its three-day meet on December 3 for the fifth bi-monthly monetary policy review of the current financial year.

The CPI inflation has been projected at 2.7-3.2 percent for the October-March period, the statement said.

Inflation projection lowered: Inflation has been projected at 2.7-3.2 per cent for second half of FY2018-19 and 3.8-4.2 per cent for the first half of FY 2019-20, with risks tilted to the upside. Oil prices have fallen almost 30 per cent after hitting a high of $86/barrel early October. This could comfort MPC, given that falling crude prices ease import pressures.

The RBI also announced an auction of a 12-day Government of India Cash Management Bill.

Some experts say RBI could cut the cash reserve ratio by 50bps, given that it has remained unchanged since 2013.

Tuesday said it would inject Rs 10,000 crore into the system through the purchase of government securities on December 6 to increase liquidity.

How will RBI address the India liquidity crisis?

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