RBI Keeps Repo Rate Unchanged, Slashes Growth Projection By 1.1%

File image of RBI governor Shaktikanta Das. RBI slashed the GDP growth projection to 5% for the current fiscal year from its previous forecast of 6.1%

(Photo: The Quint)

After slashing key interest rates on five successive occasions, the Reserve Bank of India (RBI) on Thursday, 5 December, kept the repo rate unchanged at 5.15 percent, following the bi-monthly meeting of its Monetary Policy Committee (MPC).

Besides, the central bank has also slashed the GDP growth projection to 5 percent for the current fiscal year from its previous forecast of 6.1 percent, noting that economic activity has weakened further.

Maintaining of the lending rates comes on the back of RBI’s observation that inflation is likely to witness an uptick in the near-term. Retail inflation projection has been revised upwards to 5.1- 4.7 percent for second half of the current fiscal and to 4 - 3.8 percent for first half of the next one.

However, the central bank maintained an ‘accommodative’ stance, adding that there is scope of a rate cut in the future.

The decision to maintain a status quo in lending rates was a unanimous one with all six members of the MPC voting in favour of a pause, news agency PTI reported.

Between February and October 2019, RBI has reduced repo rate by 135 basis points.

The currency market reacted in a negative manner to RBI’s decision with the Rupee falling 8 paise to 71.61 against the US dollar in mid-session trade on Thursday.

Equity markets echoed similar sentiments with the 30-share BSE Sensex falling sharply by as much as 180 points in the 10 minutes following the announcement. The index however pared some of the losses and was down around 100 points at 12:15 pm.

(This is a developing story. More details awaited)