Policy Repo Rate remains unchanged : RBI announces 5th Bi-Monthly Statement for 2018-19

December 5, 2018: The Monitory Policy Committee (MPC) of Reserve Bank of India in its  fifth  Bi-Monthly Statement for 2018-19, announced today(December 5,2018) keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent. Consequently, the reverse repo rate under the LAF remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

The unchanged key policy rates are as under.

MPC professed that its above decision is consistent with the 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 following are partial extracts from the assessments of MPC:

Global economic activity has shown increasing signs of weakness on rising trade tensions. Among advanced economies (AEs) including US, Euro area and Japan. Economic activity also decelerated in major emerging market economies (EMEs) in Q3. In China, growth slowed down on weak domestic demand. The Russian economy lost some traction, pulled down largely by a weak agriculture harvest, though the growth was buttressed by strong performance of the energy sector. The Brazilian economy seems to be recovering gradually from the economic disruption in the first half of the year. The South African economy expanded in Q3, after contracting in the previous two quarters, driven by agriculture and manufacturing. Further the prices of crude oil have sharply declined due to higher supplies and eased geo-political tensions. Base metal prices have continued to decline on selling pressure following weak demand from major economies. Gold price has risen underpinned by safe haven demand triggered by political uncertainty in some geography.

In the domestic front, gross domestic product (GDP) growth slowed down to 7.1 per cent year-on-year (y-o-y) in Q2:2018-19, after four consecutive quarters of acceleration. Slowdown in agricultural GVA was largely the outcome of tepid growth in Kharif production.Rabi sowing so far (up to end-November) has been 8.3 per cent lower as compared with the same period last year due mainly to lower soil moisture levels resulting from a deficient monsoon and a delayed Kharif harvest across states.