Highlights of RBI's sixth bi-monthly monetary policy statement

The Reserve Bank kept the key policy rate unchanged at 6 percent for the third consecutive time today in view of firming inflation. The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel had last reduced the benchmark lending rate by 0.25 percentage points to 6 percent last August, bringing it to a 6-year low. [caption id=“attachment_4196473” align=“alignleft” width=“380”] RBI logo. Reuters.[/caption] In its December review, the MPC had kept the benchmark interest rate unchanged on concerns of a possible price rise but had left the door ajar for a rate cut in future. Retail inflation crossed the RBI’s comfort level and rose to 5.21 percent in December on increase in prices of food items. The retail inflation, based on Consumer Price Index (CPI), was 4.88 percent in November. In December 2015, it was 3.41 percent. Following are the highlights of the RBI’s 6th bi-monthly monetary policy statement: * Key lending rate (repo) unchanged at 6 percent; * Reverse repo rate remains at 5.75 percent and marginal standing facility (MSF) rate and Bank Rate at 6.25 percent; * Monetary policy’s stance neutral; * Petrol and diesel prices rose sharply in January, reflecting lagged pass-through of past increases in global crude prices; * Retail inflation estimated at 5.1 percent in Q4 this fiscal and 5.1-5.6 percent in H1 of FY2018-19; * Inflation likely to ease to 4.5-4.6 percent in H2 of FY19; * Gross Value Added (GVA) growth for FY18 seen at 6.6 percent; * GVA growth for 2018-19 projected at 7.2 percent; * GST stabilising, which augurs well for economic activity; * Early signs of revival in investment activity; * RBI seeks pick-up in credit growth due to recapitalisation of PSBs and resolution proceedings under IBC; * Export growth expected to improve further on account of improving global demand; * RBI says focus of Union Budget on rural and infrastructure sectors a welcome development; * Five members voted in favour of status quo in interest rate; one member voted for increase of 0.25 percent; * Next meeting of the MPC on 4 and 5 April.