Quarter Update – RBI Keeps Rates Unchanged But Lowers Inflation Expectations In Surprise Move
In this quarter, RBI kept interest rates unchanged as it was widely predicted. However, it has surprised the market by lowering inflation expectations. The Central Bank has warned of financial instability stemming from the intensification of the ongoing global trade war and the unwinding of the decade-old easy monetary policy by developed nations.
In the current financial year, RBI forecast economic growth at 7.4 per cent. It has also supported the theme of economic revival. The economic growth will be up from the previous financial year 2018. In year 2018, the economic growth was at 6.6 per cent.
RBI kept the repo rate at 6 per cent. Repo rate is the rate at which the central bank lends to banks. Out of six members, five members of the Monetary Policy Committee voted in favor of the status quo. The person in oppose was expecting to increase the rate by 25 basis points, or 0.25 percentage point.
For the fourth quarter of FY18, RBI cut the inflation forecast to 4.5 per cent from the 5.1-5.6 per cent. The Bank pegged FY19 first-half inflation at 4.7-5.1 per cent, down from 4.5-4.6 per cent, including the impact of house rent allowance for central government employees, with risks tilted to the upside. According to the experts, the forecast for the second half is 4.4 per cent.