Mumbai : The Reserve Bank of India (RBI) kept its key repo lending rate unchanged at 6.75 percent. This announcement came in expected lines as statistics suggested repo rate to stay static on hold after consumer inflation picked up to a four-month high. Adding to this, the global scenario too is gearing up wherein emerging markets are bracing up and poised prudently for a hike in US interest rates.
RBI Governor Raghuram Rajan has allowed space for accomodating more breeze into rate easening and has left the door open in future times, allowing for more easing. This anticipatory preparation is akin to weak rural and global demands which converted rather weakly into progress and gave way to holding back economic growth, at the same time, highlighting pockets of weakness in sectors such as construction. However, the governor said further rate cuts would be dependent on inflation and external developments. He also reiterated his call for banks to lower their lending rates to reflect the steep easing undertaken by the RBI this year.
Rajan added that focus of monetary policy would shift towards achieving a consumer inflation target of 5 percent by March 2017. Although this came in with a caveat of notable risk aversion resulting in inflation remaining slightly to the downside by March next year. His statement said — The Reserve Bank will use the space for further accommodation, when available, while keeping the economy anchored to the projected disinflation path that should take inflation down to 5 percent by March 2017.
The 10-year government bond yield rose 2 basis points to 7.77 percent from levels before the RBI decision, while the broader NSE index rose 0.4 percent. The rupee was broadly unchanged.