RBI predicts inflation to cool in FY19

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The Reserve Bank of India (RBI) on Thursday kept key lending rates intact at the end of its two-day Monetary Policy Committee (MPC) meeting. The decision means that repo rate – interest rate at which the RBI lends money on short term to commercial banks – will stay at the existing 6 per cent. This is for the fourth straight occasion that the central bank has maintained status quo in key interest rates.

Despite maintaining a ‘neutral’ stance, the central bank has turned bullish and the policy has a ‘dovish’ tone as it lowered inflation projection in the fiscal year 2018-19. Retail inflation, which was projected in the range of 5.1 to 5.6 per cent in the first half of FY19, has now been moderated to the range of 4.7 to 5.1 per cent. The range for second half has also been lowered to 4.4 per cent.

However, while briefing the media, RBI Governor Urjit Patel listed financial market volatility and trade war fear as risks.

 The decision comes in line with expectation as a Reuters poll of 61 economists had predicted the same. “We expect the policy guidance and tone to be balanced and similar to that in February,” A Prasanna, chief economist at ICICI Securities Primary Dealership, had said ahead of the rate announcement.
The fear of inflationary pressure however has eased since the last MPC meeting of RBI, with February retail inflation coming at a four-month low of 4.44 per cent. The central bank is still unlikely to lower its guard as it aims to cut inflation to 4 per cent in the medium term.
source: times of India

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