In a surprising move, the RBI has kept the repo rate unchanged at 5.15% in its monetary policy meeting today. Most market participants were expecting a rate cut of 25 bps to support growth that fell to an over 6-year low of 4.5% in Jul-Sep.
Between growth and inflation, the central bank’s decision weighed in favour of inflation. RBI said that the decisions to keep the repo rate unchanged was in consonance with the objective of achieving the medium-term target for CPI inflation of 4% within a band of (+/-) 2%.
India's retail inflation for the month of October breached RBI’s medium-term target of 4% for the first time since July 2018 due to higher food prices. The central bank has revised the CPI inflation projection upwards to 5.1-4.7% for the second half of this fiscal this year from 3.5-3.7% projected in the October policy.
In the wake of concerns over growth, the central bank has decided to maintain the accommodative stance, which means a rate hike in near future is off the table and a rate cut is more likely. The central bank revised its GDP growth for FY 2019-20 downwards to 5% from 6.1% in the October policy.
