RBI monetary policy: Central bank makes no change to its stance of 'calibrated tightening'; key highlights from the statement

In its penultimate monetary policy review of the current fiscal, the RBI on Wednesday kept its key lending rate for commercial banks unchanged at 6.5 percent for the second time in succession to offer support for an economy that has lost some momentum, in a decision that was widely expected as inflation has eased significantly. [caption id=“attachment_5129811” align=“alignleft” width=“380”] Representational image. Reuters[/caption] The Reserve Bank of India also made no changes to its stance of “calibrated tightening” adopted in the policy review of October. All six members of the MPC voted to keep the rates on hold. The central bank said starting in the January-March quarter of 2019 it would begin to lower banks’ mandatory bond holding ratios by 25 basis points each quarter until it reaches 18 percent of deposits, in a move aimed to push banks to lend more. Here are the highlights of RBI monetary policy:

•  RBI keeps key lending rate (repo) unchanged at 6.5 percent
•  Reverse repo rate stands at 6.25 percent, bank rate at 6.75 percent, CRR at 4 percent
• Projects retail inflation to be between 2.7-3.2 percent in October-March
• Retains GDP growth estimate at 7.4 percent for current fiscal
• Projects April-September growth for 2019-20 at 7.5 percent with downside risks
• Says time apposite to strengthen domestic macroeconomic fundamentals
• Fiscal discipline critical to create space and crowd-in private investment
• Lower rabi sowing may adversely affect agriculture, rural demand
• Financial market volatility, slowing global demand and rising trade tensions pose a negative risk to exports
• Decline in crude oil prices is expected to boost growth prospects
• Credit offtake strengthened even as global financial conditions tightened
• Next meeting of the MPC on 5-7 February.

(With inputs from agencies)