Monetary policy review: RBI keeps repo rate unchanged at 6.5%

Mumbai, Dec 5 The Reserve Bank of India (RBI) on Wednesday left the key interest rates unchanged and also kept up 'adjusted fixing' position at its fifth bi-monthly monetary policy. Five out of the six-member Monetary Policy Committee (MPC) casted a ballot for keeping the repo rate unchanged at 6.50 percent and the reverse repo rate at 6.25 percent.

This is for the second time in a row that the central bank did not tinker with the interest rate.

In its last monetary policy in October, RBI had maintained status quo on the benchmark interest rate but warned that volatile and rising oil prices, and tightening of worldwide money related conditions present significant dangers to the development and expansion. RBI changed the strategy position to 'aligned fixing' from 'neutral', while asserting its promise to accomplish the medium-term objectives to contain price rise.

Since leaving on a fixing cycle in June, the RBI has raised its policy repo rate by 50 basis points, with the last increment to 6.50 percent made in August.

RBI also held the GDP development projection for FY19 at 7.4 percent. For the main portion of 2019-20, the GDP development has been anticipated at 7.5 percent. RBI said swelling in the second 50% of the current fiscal is projected at 2.7-3.2 percent.

Data released a few days ago showed the economy suffered an unexpectedly sharp slowdown in the July-September quarter, when yearly development slid to 7.1 percent from the two-year high of 8.2 percent posted in the past quarter.

Weaker worldwide oil costs and domestic food costs are expected to drag the headline inflation rate below projections. In October, inflation eased to 3.31 percent.