The Reserve Bank of India (RBI) in its first bi-monthly monetary policy has decided to hold the key policy rate or the repo rate at 8 per cent but cautioned that inflation risks could resurface.
A poll by Business Standard of bankers, economists and debt market experts had said the central bank was expected to hold rate due to softening on both retail and wholesale inflation rates.
RBI’s focus is now more on Consumer Price Index-linked (CPI) inflation, as recommended in the Urjit Patel committee report. Retail inflation eased more than expected, to a 25-month low, in February. It rose 8.1 per cent from a year earlier, compared with 8.79 per cent in January. Even Wholesale Price Index-based (WPI) inflation had eased to a nine-month low in February, to 4.68 per cent.
Since September 20, RBI has raised the repo rate by 75 bps due to concerns on inflation. These were despite slowing growth, which picked up a bit only recently. Having declined for three months in a row, industrial production expanded 0.1 per cent in January, even as manufacturing woes continued. (Business Standard)
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