RBI disappoints Business fraternity |
In a shocking decision for many, the Reserve Bank of India kept its key lending rate on hold that spooked markets across India on Thursday, even as it slashed its growth forecast for the economy to its lowest level in over a decade. RBI`s monetary policy committee was expected to deliver its sixth interest rate cut of the year but instead of a cut, the six-member panel unanimously voted to hold the key repo rate at 5.15% while the reverse repo rate was also held at 4.90%. Bond yields spiked and equities fell after the decision. In a statement, the panel said that the MPC recognizes that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture. The RBI lowered its GDP growth forecast for the year ending March 2020 to 5% from 6.1%, which if proved right would be the lowest full-year growth rate for the economy since the global financial crisis. RBI Governor Shaktikanta Das told a news conference after the policy decision that both the central bank and government were committed to the revival of growth, but it was critical that monetary and fiscal policy work in tandem and the Monetary Policy Commission was concerned about inflation in the near term, while acknowledging there is room to cut rates further.
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