RBI keeps benchmark interest rate unchanged at 5.15%; other key highlights of monetary policy review

The Reserve Bank of India on Thursday kept the key policy rate unchanged at 5.15 percent and decided to continue with its accommodative stance to support the economy. The central bank also revised GDP growth downwards to 5 percent for 2019-20 from 6.1 percent projected in its October policy. “The Monetary Policy Committee 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 RBI said in its fifth bi-monthly monetary policy for this fiscal. The panel decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target. [caption id=“attachment_4875601” align=“alignleft” width=“380”] File image of RBI. AFP[/caption] All the six members of the MPC voted in favour of a rate pause. The CPI inflation projection is revised upwards to 5.1-4.7 percent for H2 FY20 and 4-3.8 percent for H1 FY21. Between February and October 2019, the RBI has reduced repo rate by 135 basis points. Here are the key highlights of RBI monetary policy review:

• Repo rate or short-term lending rate unchanged at 5.15 percent;
• GDP growth forecast lowered for current fiscal to 5 percent from 6.1 percent earlier;
• Various high frequency indicators suggest demand conditions remained weak;
• RBI continues with accommodative monetary stance to revive growth;
• Recognises that there is monetary policy space for future action;
• Retains retail inflation projection for second half of year raised to 5.1-4.7 percent;
• RBI notes monetary transmission to improve going forward;
• Foreign exchange reserves stood at $451.7 bn on 3 December, up $38.8 bn over March-end 2019;
• All members of rate-setting Monetary Policy Committee (MPC) voted for rate pause;
• Next monetary policy review meet scheduled during 4-6 February, 2020.

(With PTI inputs)