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Fourth Bi-monthly Monetary Policy Statement, 2017-18(October 4, 2017)

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Fourth Bi-monthly Monetary Policy Statement, 2017-18

The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) on Oct 04 has decided to maintain status quo and keep its key interest rate, the repo rate, unchanged at 6 per cent. It had last cut rates by 25 bps two 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. Viral V. Acharya, Dir Michael Patra and Dr. Urjit R. Patel were in favour of status quo while Dr. Ravindra H. Dholakia voted for a policy rate reduction of 25 basis points.

The monetary policy committee of the RBI has cut its GDP forecast, revising it down to 6.7% this year as against 7.3% per cent projected earlier in August.

GDP growth had fallen to 5.7% in the first quarter and has been coming down continuously over the past five quarters.

On inflation, the committee felt that it has broadly moved on expected lines. It has projected that inflation will move in the 4.2 per cent to 4.6 per cent range over the next half year.

The next meeting of the MPC is scheduled on December 5 and 6, 2017.

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. The main considerations underlying the decision are set out in the statement below.


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