The Reserve Bank of India (RBI) has kept interest rates unchanged but held out a promise to cut them if the upside risks to the inflation do not materialise.
It also coaxed banks to lend more in order to support the slowing economy, media reports said.
With all the six member of the monetary policy committee (MPC) voting for a hold on rates, the RBI kept benchmark repurchase (repo) rate at 6.5 per cent, reported PTI.
Having raised rates twice this year, the central bank retained its ‘calibrated tightening’ policy stance, the report said.
“Even as inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook,” it said.
While the apex bank’s statement was silent on future outlook on interest rates, RBI Governor Urjit Patel at the customary post MPC meeting press conference held out hope of a reduction if upside risks to inflation did not materialise, the report pointed out.
“If the upside risks we have flagged do not materialise or are muted in their impact as reflected in incoming data, there is a possibility of space opening up for commensurate policy actions by the MPC,” Patel was quoted as saying.
He reportedly said the MPC retained its stance at calibrated tightening “so as to buy time to pause, reflect and undertake future policy action with more robust inflation signals”.
The RBI lowered inflation forecast for the second half of the fiscal year that ends in March 2019 to 2.7-3.2 per cent from a range of 3.9-4.5 per cent. The projection is below the medium-term target of 4 per cent. Inflation in October eased to a 13-month low of 3.31 per cent, the PTI report pointed out.
The apex bank retained GDP growth forecast for the current fiscal year at 7.4 per cent, it said.