As was widely expected, the six-member monetary policy committee (MPC) voted 5:1 in favor of a status quo on the policy repo rate, citing various reasons, including the possibility of retail inflation edging up, risk of fiscal slippage, and oil prices going up. The central bank nudged up its inflation projection to the 4.3-4.7 per cent range for the third and fourth quarters of FY18 against 4.2-4.6 per cent projected in the October bi-monthly policy. It, however, retained the gross value added (GVA) projection at 6.7 per cent. The MPC also decided to persevere with the neutral stance and reiterated its commitment to keeping consumer price index (CPI) inflation at a target of 4 per cent while supporting growth. Financial market players, however, seemed disappointed with the RBI’s decision. Of the five bi-monthly monetary policies announced in this financial year so far, the RBI pared the repo rate — the interest rate at which banks borrow funds from the central bank to overcome short-term liquidity mismatches — only once, from 6.25 per cent to 6 per cent in the August 2017 review.

(The Hindu)