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No cheap housing, car loans for now as RBI keeps interest rates on hold

New Delhi, DH News Service Dec 6 2017, 21:50 IST
The Reserve Bank of India (RBI) Governor Urjit Patel attends a news conference after the bi-monthly monetary policy review in Mumbai, India, December 6, 2017.

The Reserve Bank of India (RBI) Governor Urjit Patel attends a news conference after the bi-monthly monetary policy review in Mumbai, India, December 6, 2017.

The Reserve Bank of India (RBI) on Wednesday maintained a status quo on key interest rates but raised inflation forecast for the remaining period of the current fiscal and cautioned that the recent duty roll back on petrol and diesel and GST rate cuts could result in a fiscal slippage.

The 6-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel decided to keep the repo rate unchanged at 6%, the reverse repo at 5.57% after inflation rose to a seven-month high in October. It raised the inflation forecast to 4.3%-4.7% for the period till March 31, 2018. However, the economic growth forecast was kept unchanged at 6.7% for the financial year 2017-18.

Repo rate is the rate at which the RBI lends money to commercial banks.

The MPC also cautioned that going forward, the non-food, non-fuel or core inflation was expected to be sticky and therefore maintained a neutral stance on the future rate cuts, implying that future decision on rates will depend on the data flow in coming quarters.

Wednesday's decision was more or less on the expected lines as almost all macro-economic indicators leading to the monetary policy review €“ crude oil and commodity prices, retail inflation and the government's fiscal situation -- pointed towards a negative.

Economists said, the RBI may go in for a pause in rates in the foreseeable future as November and December inflation rates were seen inching up on the back of farm loan waiver and the upward revision in HRA impact. The recent GST rate cuts on several items were also seen inflationary.

Even as the MPC raised inflation forecast for third and fourth quarters, it said it was committed to keeping the retail inflation close to 4% on a durable basis.

The next monetary policy review will be on February 7.

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