Fifth Bi-monthly Monetary Policy Statement 2018-19 RBI keeps policy rates unchanged; announces scheme for digital transactions

The Reserve Bank of India, RBI, maintained the status quo on all key policy rates in the fifth bi-monthly monetary policy review announced this afternoon. Subsequently, the repo rate remains unchanged at 6.5 percent and the reverse repo rate at 6.25 percent. After assessing the current and evolving macroeconomic situation in the economy, the six members Monetary Policy Committee (MPC) decided to keep the policy Repo Rate under the Liquidity Adjustment Facility (LAF) unchanged at 6.5 percent.  The Reverse Repo Rate under the LAF remains at 6.25 percent. The Marginal Standing Facility (MSF) rate and the Bank Rate stand at 6.75 percent. The decision of the MPC was consistent with the monetary policy in consonance with the objective of achieving the medium-term target for Consumer Price Index (CPI) inflation of 4 percent within a band of +/- 2 percent.

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Key Highlights 

  • RBI lowered its inflation forecast based on moderation in food inflation and the sharp decline in international crude oil prices. Accordingly, inflation is projected to be in the range of 2.7 to 3.2 percent in the second half of 2018-19.
  • Inflation will likely to stay in the range of 3.8 to 4.2 percent in the first half of 2019-20.
  • RBI retained GDP growth rate projection at 7.4 percent for 2018-19 and at 7.5 percent in the first half of 2019-20.
  • Lower RABI sowing, slowing global demand, and rising trade tensions may adversely affect growth prospects while the decline in crude oil prices is expected to boost India’s growth prospects.

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