In a surprise move, the Reserve Bank of India (RBI) on Friday maintained status quo retaining the repo rates at 6.5 per cent after the bi-monthly meeting of monetary policy committee. However, the RBI changed the policy stance to "calibrated tightening" from neutral in the backdrop of a falling rupee and rising crude.
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In light of fiscal pressures, rupee depreciation and rising crude oil prices, it was widely expected that the RBI would increase the benchmark lending rates by another 25 basis points.
The central bank also retained the GDP growth estimate at 7.4 per cent for financial year 2018-19 and projected the same to go up to 7.6 per cent in 2019-20. However, the RBI has warned that the headline inflation was estimated to accelerate to 4.5 per cent by March 2019 quarter with upside risks. "The inflation outlook has been clouded with several uncertainties... Calls for a close vigil over the next few months as several upside risks persist and output gap has virtually closed," the RBI stated.
The RBI had raised its benchmark repo rate for the second consecutive time by 25 basis points to 6.50 per cent in August.
