MUMBAI: The RBI’s Monetary Policy Committee chose to hike its key policy rate, the repo rate, by 25 basis points to 6.5 per cent, in its third bi-monthly meeting for the fiscal. This is the second consecutive hike.
The policy stance has however been retained as neutral.
Consequently, the reverse repo rate under the LAF stands adjusted to 6.25 per cent, and the marginal standing facility rate and the Bank Rate to 6.75 per cent.
The Central Bank said various indicators suggest economic activity continued to be strong. “The progress of the monsoon so far and a sharper than the usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income. Robust corporate earnings, especially of fast moving consumer goods (FMCG) companies, also reflect buoyant rural demand. Investment activity remains firm even as there has been some tightening of financing conditions in the recent period,” the policy statement said.
The MPC has retained GDP growth projection for 2018-19 at 7.4 per cent.
Inflation is projected at 4.6 per cent in Q2, 4.8 per cent in H2 of 2018-19 and 5.0 per cent in Q1 of 2019-20. Excluding the HRA impact, CPI inflation is projected at 4.4 per cent in Q2, 4.7-4.8 per cent in H2 and 5.0 per cent in Q1 of 2019-20.