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Last Updated Friday September 22 2017 06:53 PM IST

RBI keeps policy rate on hold for third meeting in a row

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RBI keeps policy rate on hold for third meeting in a row Representative image. Photo: Reuters

Mumbai: The Reserve Bank of India (RBI), in its first bi-monthly monetary policy review of 2017-18, on Thursday kept its key lending rate unchanged at 6.25 percent, saying it awaited further macroeconomic data before making changes.

However, the RBI narrowed the policy corridor and hiked the reverse repo rate to six percent.

"Consequent upon the narrowing of the LAF (liquidity adjustment facility) corridor, the reverse repo rate under the LAF is at 6.0 percent, and the marginal standing facility (MSF) rate and the Bank Rate are at 6.50 percent," an RBI policy statement said.

"The decision of the MPC is consistent with a neutral stance of 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, while supporting growth," it added.

THe RBI said risks are evenly balanced around the inflation trajectory at the current juncture. "There are upside risks to the baseline projection," it said.

"Inflation developments have to be closely and continuously monitored, with food price pressures kept in check so that inflation expectations can be re-anchored.

"At the same time, the output gap is gradually closing. Consequently, aggregate demand pressures could build up, with implications for the inflation trajectory," it added.

At its last policy review in February, while holding rates at 6.25 percent, the central bank had changed its policy stance from "accommodative" to "neutral".

Expectations that the RBI will maintain status quo on rates had been fueled by inflation numbers, with wholesale inflation soaring to over a three-year high of 6.55 percent in February and retail inflation climbing to 3.65 percent due to rise in food and fuel prices.

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