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RBI keeps repo rate unchanged

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RBI's monetary policy committee on Wednesday voted 6-0 to maintain status quo on repo rate, its third unanimous decision in a row.

The Reserve Bank of India (RBI) on Wednesday left its key policy rate unchanged as it tried to assess how the transitory effects of demonetisation on inflation and the output gap play out.  The repo rate, at which it infuses liquidity into the banking system and is the signalling rate now, stands at 6.25%. One basis point is one hundredth of a percentage point.

Since the demonetisation drive ended on 30 December, most large banks have cut their marginal cost of funds-based lending rates (MCLR) with State Bank of India reducing rates by up to 90 bps. The bank rate cuts were supported by a large inflow of low cost deposits after the government invalidated Rs500 and Rs1,000 currency notes.

Retail inflation decelerated to a two-year low of 3.41% in December from 3.63% the previous month as vegetable prices continued to fall. RBI is aiming to keep retail inflation under 5% in the fourth quarter and 4% within a band of 2 percentage points on either side in the medium term.

At 2.31pm, the #rupee was trading at 67.36, up 0.08% from its previous close of 67.41. The 10-year benchmark bond yield was trading at 6.445% from its previous close of 6.431%. India?s benchmark Sensex fell 0.41% to 28,218.49 points.

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