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RBI keeps policy rates unchanged

Thu 08 Dec 2016, 11:07:45
Home loan consumers will have to wait a tad longer for a reduction in rates as the Reserve Bank of India decided to take a pause on its interest rate cuts. 
The central bank, which has cumulatively reduced rates by 175 basis points (bps) since January 2015, decided to leave repo rate and reverse repo rates unchanged at 6.25% and 5.75%, respectively. Analysts as well as market experts were expecting a minimum rate cut of 25 basis points after the two-day meeting of monetary policy committee (MPC).
“The MPC was of the view that given the reduction of the policy rate of 25 bps in October, which cumulated to a reduction of 175 bps since January 2015, a further reduction in the policy rates is not warranted at this juncture,” RBI governor Urjit Patel told reporters in the post policy briefing.
The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5% by Q4 of 2016-17, and the medium-term target of 4% within a band of plus or minus 2% (+/- 2%), while supporting growth, the RBI said.
The central bank, however, did not rule out an inter-cycle rate cut ahead of the next MPC meeting on February 7 and February 8.“Given that we want to achieve 5% by Q4 of 2016-17, and we are on track to do that with incoming data, if we find on a durable basis some space is found then we will take a look at that,” Patel said.
The RBI, in the policy, also lowered its GDP forecast for 2016-17 by 50 bps to 7.1% from 7.6% earlier.

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