Central bank keeps key lending rate unchanged at 6.5%; here are highlights from RBI monetary policy

Mumbai: The Reserve Bank opted for a surprising status quo at the bi-monthly review on Friday on expectations of softening price rise, but changed the policy stance to “calibrated tightening” from “neutral”. A majority of the analysts and bankers were expecting the six-member Monetary Policy Committee to go at least for a 0.25 percent hike in key rates at the review. “The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis,” the resolution of the MPC after a three-day meet said. [caption id=“attachment_5129811” align=“alignleft” width=“380”] Representational image. Reuters[/caption] The repo rate, at which the RBI lends to the system, will continue to be at 6.5 percent and the reverse repo at which it absorbs excess funds will be 6.25 percent. The Monetary Policy Committee (MPC) voted 5:1 in favour of a status quo, with only Chetan Ghate voting for a 0.25 percent hike. The MPC headed by RBI Governor Urjit Patel said that the recent excise duty cut by the government on petrol and diesel will help contain inflation. The following are the highlights of the fourth bi-monthly monetary statement for 2018-19: * RBI keeps key lending rate (repo) unchanged at 6.5 percent * Reverse repo rate stands at 6.25 pc, bank rate at 6.75 percent, CRR at 4 percent * Projects retail inflation to rise to 3.8-4.5 percent in October-March * Retains GDP growth estimate at 7.4 percent for current fiscal * Global economic activity becoming uneven, outlook clouded by uncertainties * Excise cut in petrol and diesel will moderate retail inflation * Rise in oil prices may have a bearing on disposable incomes, dent profit margins of corporates * Oil prices remain vulnerable to further upside pressures * Global, domestic financial conditions tightened, may dampen investment activity * Exports outlook uncertain * Fiscal slippage at the centre/state to have a bearing on the inflation outlook, besides heightening market volatility and crowding out private investment * Inflation outlook needs a close vigil over the next few months, several upside risks persist * Trade tensions, volatile and rising oil prices, and tightening global financial conditions pose substantial risks to growth, inflation outlook * Calls for further strengthening of domestic macroeconomic fundamentals * Next meeting of the MPC on 3-5 December.