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Fifth Bi-monthly Monetary Policy Statement, 2017-18(December 6, 2017)

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Fifth Bi-monthly Monetary Policy Statement, 2017-18

The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) on Dec 06 has decided to maintain status quo and keep its key interest rate, the repo rate, unchanged at 6 per cent in its fifth bi-monthly policy review of the fiscal year. It had last cut rates by 25 bps four months earlier in its August review. The pause was on expected lines as market consensus had predicted a pause in its cutting cycle.

The six member monetary policy committee voted on the basis of a majority for a pause. Dr. Chetan Ghate, Dr. Pami Dua, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Dr. Urjit R. Patel were in favour of the monetary policy decision, while Dr. Ravindra H. Dholakia voted for a policy rate reduction of 25 basis points.

The RBI retained its GDP projections for the year at 6.7 per cent with risks evenly balanced. It noted that Q2 growth which rebounded to 6.3 per cent from 5.7 per cent earlier, was lower than projected in the October review.

On inflation outlook, the RBI projected that it would be in the region of 4.3% to 4.7% in Q3 and Q4 this fiscal.

The next meeting of the MPC is scheduled on February 6 and 7, 2018.

Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to:

  • keep the policy repo rate under the liquidity adjustment facility (LAF)
    unchanged at 6.0 per cent.

Consequently, the reverse repo rate under the LAF remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent.

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 per cent within a band of +/- 2 per cent, while supporting growth. 

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