RBI keeps repo rate unchanged at 6 per cent, predicts higher inflation

Mumbai: Reserve Bank of India kept the repo rate unchanged at 6 per cent for the third straight time in view of firming inflation in its monetary policy on Wednesday.

The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, started its 2-day meeting on Tuesday.

RBI saw inflation hardening to 5.1 per cent in the fourth quarter of 2017-18 and further to 5.1-5.6 per cent in the first half of next fiscal. 

It lowered the economic growth projection to 6.6 per cent for 2017-18, from 6.7 per cent and has estimated 7.2 per cent growth in next fiscal.

RBI Governor Urjit Patel said GST stabilising and economic activity were picking up and early signs of investment revival were visible. 

Reserve Bank also saw pick in credit growth due to bank recapitalisation and resolution proceedings under insolvency and bankruptcy code (IBC).

In its December review, the MPC had kept the benchmark interest rate unchanged on concerns of a possible price rise but had left the door ajar for a rate cut in future.

Retail inflation crossed the RBI's comfort level and rose to 5.21 per cent in December on increase in prices of food items. The retail inflation, based on Consumer Price Index (CPI), was 4.88 per cent in November. In December 2015, it was 3.41 per cent.

The Reserve Bank of India had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low.

(With PTI inputs)