The Reserve Bank of India’s Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 5.5 percent on October 1, second time in a row.
The MPC also kept the stance unchanged to 'Neutral'.
The MPC considered it prudent to wait for impact of policy actions to play our before charting the next policy action
As a result, the standing deposit facility (SDF) rate remains unchanged at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent.
The decision was in line with Moneycontrol’s poll of economists and bankers who predicted the RBI’s Monetary Policy Committee (MPC) will hold rates due to comfort from the higher growth in the first quarter while taking time to assess the data on the Goods and Services Tax (GST) reforms.
Inflation forecast
Overall inflation outlook has turned more benign due to a sharp decline in food prices, the governor noted. Consequently, the average headline inflation of this year has been revised from 3.1% to 2.6%.
The governor also observed that the recent GST cuts will also help in reducing prices.
GDP Growth
The big surprise came on the GDP growth front with the RBI MPC revising it up to 6.8% from its earlier projection of 6.5%.
However, the governor noted that prolonged geopolitical tension and volatility in international financial markets pose downside risks to the growth.
Liquidity
The governor said that the liquidity stood at an average daily surplus of Rs 2.1 lakh crore since the last MPC meeting in August. Money market rates have been stable amid comfortable liquidity in system.
On the depreciation in rupee, the governor said that the regulator is keeping a close watch on rupee movement and will take appropriate steps as warranted.
External scenario
The governor said the forex reserves are sufficient to cover more than 11-months of outflows. The overall external sector continues to be resilient, and we remain confident of meeting our external obligations comfortably.
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