RBI keeps repo rate steady, maintains neutral stance

Monetary panel set to hold rates citing inflation growth revival

RBI seen keeping rates unchanged

Five of the six-member monetary policy committee voted for the move, which was predicted by 42 of 48 economists in a Bloomberg survey with the rest seeing a cut to 5.75 percent.

Mumbai: The Reserve Bank on Wednesday retained economic growth projection for 2017-18 at 6.7 per cent saying that the risks are evenly balanced.

The government and business leaders, however, have been pushing RBI to lower rates to provide an impetus to private investment and boost broader economic growth that has shown signs of revival.

The Reserve Bank of India refused to bite the bullet and kept the key lending rate at a seven-year low of 6 per cent on Wednesday.

In the previous monetary policy review held in October, RBI had projected inflation to be in range of 4.2-4.6 per cent for October-March (second half) period of this fiscal.

The RBI said that "two of the key factors determining the cost of living conditions and inflation expectations - food and fuel inflation - edged up in November". That's still low by Indian standards, but not far from the central bank's 4 percent target.

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Another source of RBI discomfort is that core inflation, which excludes food and energy prices, has remained stubbornly high at around 4.5 percent.

Since the last policy in early October, inflation as measured by the Consumer Price Index has accelerated, inching closer to the 4% mark, which is the central bank's medium-term target. "The recent rise in worldwide crude oil prices may sustain, especially on account of the OPECs decision to maintain production cuts through next year", RBI said.

That has sparked renewed calls from some government officials for the RBI, which has cut the repo rate by 200 bps since January 2015, to trim again.

"The recovery is a source of comfort to the RBI as it lowers pressure on them to take a growth-supportive stance", said Radhika Rao, an economist at DBS in Singapore.

"It's too early to predict beyond the February policy meet, we'll have to see how things shape up".

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