RBI keeps rates on hold despite economy fears

Thu Dec 05 2019
Rajesh Sharma (2046 articles)
RBI keeps rates on hold despite economy fears

 The Reserve Bank of India (RBI) kept its key lending rate on hold in a surprise decision on Thursday, despite a worrying slowdown in the country that prompted the central bank to sharply reduce its economic growth forecast to 5% for the year through March.

The six-member monetary policy committee (MPC) unanimously voted to hold the key repo rate at 5.15% while the reverse repo rate was also held at 4.90%.

The RBI reiterated that it would maintain an accommodative stance as long as it is necessary to revive economic growth which slowed to 4.5% in the September quarter from 7% a year ago, to stand at its lowest in more than six years.

“The MPC recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture,” the committee said in a statement.

A Reuters poll of 70 economists had predicted the RBI would cut its repo rate by 25 bps and then by another 15 bps in the second quarter of 2020, where it will stay at least until 2021.

Rajesh Sharma

Rajesh Sharma

Rajesh Sharma is Correspondent for Stock Market of South East Asia based in Mumbai. He has been covering Asian markets for more than 5 years.