The Reserve Bank of India or RBI today kept its repo rate or key lending unchanged at 6.25 per cent, in line with what most economists expected. According to a Reuters poll of 60 economists, most of them expected the RBI's monetary policy committee to maintain status quo on repo rate. The monetary policy committee has held the repo rate steady at a six-year low since cutting it by 25 basis points in October.
Citing inflation risks, the central bank had changed its monetary policy to "neutral" from "accommodative" in February, leaving it open to raise, or lower, rates in months ahead.
However, expectations of a rate cut from the RBI in the future have brightened after forecast of normal monsoon. An around 5 per cent rally in the rupee against the dollar this year could further ease inflation, while global commodity prices have eased. The weather department on Tuesday upgraded its forecast, saying that the monsoon is expected at 98 per cent of the long-term average this year, 2 percentage points higher than its previous forecast, potentially boosting farm incomes and economic growth. Calming inflation fears, the government has also mostly kept the goods and services tax or GST rates in line with existing tax rates.
Consumer price inflation data for May will be released next week. Notching its lowest annual rate in at least five years, consumer price inflation slowed to 2.99 per cent in April from 3.89 per cent in March, just below the RBI's target of 4.0 per cent.
Besides that the economic growth slowed down to 6.1 per cent in January-March, down from 7 per cent in the previous quarter, to post its slowest growth rate in more than two years.
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