New Delhi: The Reserve Bank on Wednesday kept key interest rates unchanged at its fourth bi-monthly monetary policy review for FY 2017-18 amid lingering concerns over inflation.
Here are the major highlights of the review:
1) The policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 percent.
2) The reverse repo rate under the LAF remains at 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 percent.
3) The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
4) The projection of real GVA growth for 2017-18 has been revised down to 6.7 percent from the August 2017 projection of 7.3 per cent, with risks evenly balanced.
5) In August, headline inflation was projected at 3 per cent in Q2 and 4.0-4.5 per cent in the second half of 2017-18. Actual inflation outcomes so far have been broadly in line with projections, though the extent of the rise in inflation excluding food and fuel has been somewhat higher than expected.
6)Inflation is expected to rise from its current level and range between 4.2-4.6 per cent in the second half of this year.
7) The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term.
8) Consumer confidence of households polled in the Reserve Bank’s survey has weakened in terms of the outlook on employment, income, prices faced and spending incurred.
9) The MPC decided to keep the policy stance neutral and monitor incoming data closely.
10) The MPC was of the view that various structural reforms introduced in the recent period will likely be growth augmenting over the medium- to long-term by improving the business environment, enhancing transparency and increasing formalisation of the economy.