The Reserve Bank of India (RBI) on Friday raised its consumer inflation forecast to 3.4 per cent for the second quarter of 2019-20. The central bank left its projections for the remainder of the current financial year and the first three months of the year starting April 2020. In its fourth bi-monthly policy statement of 2019-20, the RBI said it expects consumer inflation at 3.5-3.7 per cent in the second half of the financial year and 3.6 per cent in the quarter ending June 30, 2020.
The RBI reduced the repo rate by 25 basis points to 5.15 per cent on Friday - a level last seen in 2010. That marked the fifth straight reduction in the repo rate - which is the key interest rate at which the RBI lends short-term funds to commercial banks - so far this year.
The central bank also maintained an "accommodative" stance on policy, which rules out hikes for now.
Governor Shaktikanta Das said that the RBI will remain accommodative "as long as the growth momentum remains as it is now and until growth revives". The RBI also said that it would ensure that inflation remains within the targeted levels.
Economists say the RBI's commitment to remain accommodative for as long as necessary to push growth and contain inflation is a strong signal of further monetary easing.
Inflation is the key mandate of the RBI with a target of 4 per cent in the medium term.
Consumer inflation hit a 10-month low of 3.21 per cent in August, but remained below the RBI's goal for the thirteenth month in a row.
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