The Reserve Bank of India on Friday left key rates unchanged, though it warned that rising global oil prices and tightening financial markets threatened economic growth and could increase in inflation.
The six-member Monetary Policy Committee of the RBI voted to keep the repo rate unchanged at 6.50 per cent. The reverse repo rate was also left unchanged at 6.25 per cent. The Cash Reserve Ratio also stands unchanged at 4 per cent.
Later, interacting with the press, Reserve Bank of India Governor Urjit Patel said the MPC voted 5:1 in favour of maintaining status quo while only one member, Chetan Ghate, voted for a 0.25 per cent hike. The Governor said the MPC was not bound to raise rates at every meeting. The central bank had raised rates by 0.25 per cent in the last two meetings.
”The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis,” its resolution after the three-day meet said.
The RBI said actual inflation has been ‘below projections’ as the expected seasonal increase in food prices did not materialise and inflation, excluding food and fuel, had moderated.
Patel said food inflation has been ‘unusually benign’. However, he hinted this to increase “influenced by the hike in minimum support prices, global crude prices, second round impact of the HRA allowance for government employees and currency movement”.
The RBI also noted that the cut in petroleum price by the government on Thursday would moderate retail inflation.
The RBI Governor later said emerging markets are facing headwinds from rising crude oil prices. The central bank’s foreign exchange reserves, he said, was sufficient to finance 10 months of imports. He further added that the recent fall in the rupee was moderate compared to that of other emerging markets.
Shortly after Patel’s statement, the rupee fell below to a new low of 74.13 for a dollar.
