Mumbai: The Reserve Bank of India (RBI) has kept the key repo rate unchanged at 6.25 per cent at the first bi-monthly monetary policy of 2017-18, conducted by the monetary policy committee (MPC).
However, the Reverse repo rate has been hiked from 5.75 per cent to 6 per cent. As per reports, the development could lead to a period of confusion in markets.
As per RBI Governor Urjit Patel said the first and foremost duty of the MPC is to align the money market with the key policy rates.
He also assured that there is further scope for rates to come down but it will be done slowly as to ensure that there is no confusion. Patel said, “There is further scope for transmission of rates.”
Patel said that the committee has looked at every corner to keep risks at bay, and projected the key lending rate for the first half of this fiscal at 4.5 per cent and five per cent for the second half of the year.
GDP growth to improve
The RBI has further projected that the GDP will grow at 7.4 per cent this fiscal as against the current 6.7 per cent, suggesting that the money market has recovered from the November 8 demonetisation move.
As per the RBI, several indicators have indicated that there will be a modest improvement in macroeconomic outlook.
As mentioned earlier, the committee of the RBI has clarified that risk has been evenly balanced around inflation trajectory, though there is an upside risk from uncertainty about monsoon and one-off effect of Goods and Services Tax.
After discussing the key lending rates and giving a prediction on GDP, Patel stressed that there is a need to create consensus so that loan waiver promises are eschewed, a it will help the apex bank in maintaining the much required balance.
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