RBI retains repo rate at 6.5%
Flags rising oil prices as risk Changes stances to calibrated tightening
Mumbai, Oct. 5: On a day the rupee breached the 74-mark against the dollar for the first time, RBI governor Urjit Patel said on Friday that the domestic currency is still better than its emerging market peers.
“The rupee fall, in some respect, is moderate in comparison to several other emerging market market peers,” the governor said.
Ruling out any target for the currency, he said, “Our response to these unsettled conditions has been to ensure that foreign exchange market remains liquid with no undue volatility.”
However, after back-toback hike since June, RBI kept rates unchanged, surprising markets that had expected a rate hike to support weakening rupee and combat inflationary pressures from high crude oil prices.
With five of its six members voting for a status quo, RBI’s monetary policy committee left repo rate at 6.50 per cent and changed policy stance to ‘calibrated tightening’ from ‘neutral’, which Urjit Patel said meant there would be no rate cut in the current cycle.
Vowing to keep the inflation rate under targeted 4 per cent, RBI warned that volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to growth and inflation.
A majority of the analysts and bankers had expected that the Reserve Bank will raise interest rate by at least a 0.25 per cent with some even rooting for a 0.50 per cent increase in view of the developments over the last few days where rupee had continued to slide and international oil prices hit four-year high.