RBI Policy Review: Repo Rate Unchanged, Surprises Markets

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Mumbai: Taking markets by surprise, RBI Governor Urjit Patel on Wednesday kept short term lending rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation.

Patel-led 6-member Monetary Policy Committee, which had in its first policy review cut interest rate by 0.25 per cent in October, belied expectations to keep benchmark repo rate unchanged at 6.25 per cent unanimously.

In view of disruption in economic activities due to demonetisation, RBI lowered growth forecast from 7.6 per cent to 7.1 per cent for the current fiscal.

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On retail inflation, the policy statement said: Retail inflation measured by the headline consumer price index (CPI) eased more than expected for the third consecutive month in October, driven down by a sharper than anticipated deflation in the prices of vegetables. Underlying this softer reading, however, was an upturn in momentum as prices rose month-on-month across the board.

This is the first policy review of the Reserve Bank of India since November 8, 2016 when Prime Minister Narendra Modi announced the demonetisation or scrapping of Rs 500 and Rs 1000 currency notes.

All six members voted in favour of the monetary policy decision.