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RBI keeps repo rate unchanged at 6.5%, lowers inflation forecast sharply

05 December 2018

In its last bi-monthly monetary policy, the bank had kept the repo rate unchanged at 6.5 percent.

"The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth", the central bank said in a statement. One basis point is one-hundredth of one percentage point, i.e. 0.01 percent.

The liquidity coverage ratio (LCR) refers to highly liquid assets held by banks to meet short-term obligations.

The RBI, however, lowered inflation forecast sharply for the second half (six months) of 2018-19 to 2.7 per cent-3.2 per cent. RBI maintained caliberated tightening stance and projected HIFY20 GDP growth at 7.5 per cent.

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The MPC has chose to continue the practice of a three-day meeting format for the Sixth Bi-monthly Monetary Policy Statement 2018-19 commencing on February 5, 2019.

Over the past five years, annual inflation saw its lowest level in April 2013, with 6.13 percent, and its highest level this October.

Weaker global oil prices and domestic food prices are expected to drag the headline inflation rate below projections.

The board members include RBI governor Urjit Patel, RBI deputy governor Viral Acharya, executive director Michael Debabrata Patra, IIM Ahmedabad professor Ravindra H Dholakia, Delhi School of Economics director Pami Dua and Indian Statistical Institute Professor Chetan Ghate.

RBI keeps repo rate unchanged at 6.5%, lowers inflation forecast sharply