Monetary policy: RBI keeps repo rate unchanged at 6%, maintains ‘neutral’ stance

The Reserve Bank on Thursday kept the key policy rate unchanged at 6% for the fourth consecutive time since August last year, in view of uncertainties around inflation.

The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, had last reduced the benchmark lending rate by 0.25 percentage points to 6% last August, bringing it to a 6-year low.

“The MPC decided to keep the policy repo rate on hold and continue with the neutral stance. The MPC reiterates its commitment to achieving the medium term target for headline inflation of 4% on a durable basis,” said the first bi-monthly monetary policy for fiscal year 2018-19.

The repo rate, at which the central bank lends short-term money to other banks, will continue to stay at 6%. The reverse repo, rate at which it borrows from banks and absorbs excess liquidity, will remain at 5.75%.

The headline inflation after surging to a concerning 5.2% in December last year, cooled off to 5.07% in January and further to 4.4% in February.

RBI has been asked by the government to target inflation at 4%, plus or minus 2%, and its rise beyond the comfort zone will put pressure on the central bank not cut interest rate (repo rate).