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RBI Keeps Repo Rate Unchanged At 5.15%, Cuts GDP Growth Forecast To 5%

5 Dec 2019 11:56 am
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MUMBAI (Commoditiescontrol) - In an unexpected move, the Monetary Policy Committee of the Reserve Bank of India on Thursday kept policy rates unchanged as it decides to wait for the past policy actions undertaken by the government and the central bank to play out in the economy, while maintaining an “accommodative stance as long as it is necessary."

With a no rate action, the repo rate—the rate at which banks borrow from it—remain unchanged at 5.15 percent. RBI has cut policy rates by 135 basis points so far in 2019.

The decision to hold rates was a unanimous one by all the six members of the monetary policy committee (MPC).

RBI also sharply reduced its growth forecast for 2019-20 from 6.1 percent to 5 percent, with the committee noting that a delay in revival of domestic demand, further slowdown in global economic activity and geo-political tensions could pose downside risks to growth. GDP growth has fallen to 4.5 percent in the July to September period, the weakest pace in more than 6 years.

RBI also revised its inflation forecast from 3.5-3.7 percent to 5.1-4.7 percent for the second half of fiscal year 2019-20. This comes after consumer price inflation quickened to 4.62 percent in October, breaching the 4 percent target for the first time since July 2018. The MPC noted that inflation is expected to moderate below target by the second quarter of fiscal year 2020-21 and it’d wait for data for more clarity on inflation outlook.

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