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RBI may keep key policy rates unchanged: Report

As inflation may stay ‘benign’ in the range of 3 to 4.4 percent, the Reserve Bank of India (RBI) is expected to keep key policy rates unchanged

New Delhi: As inflation may stay ‘benign’ in the range of 3 to 4.4 percent, the Reserve Bank of India (RBI) is expected to keep key policy rates unchanged in the remaining months of 2018-19.

Policy review meeting
The focus of the Monetary Policy Committee (MPC) remains purely on inflation print, which is expected to be benign (3-4.4 percent) in the second half of 2018, according to a report by Kotak Economic Research. In the policy review meeting earlier this month, RBI Governor Urjit R Patel, and the majority of RBI’s six-member MPC, favoured keeping the key repo rate unchanged as a part of “calibrated tightening” to keep retail inflation at 4 percent. “The minutes reaffirmed our view post the October policy and the September CPI inflation print, that the RBI will possibly stay on hold for the rest of 2018-19,” the report said.

'Risks to inflation still exist'

It, however, added that upside risks to inflation still exist, owing to pass-through of MSPs, elevated crude oil prices, volatility in global financial markets, hardening of input prices amid rupee weakness and staggered impact of HRA increases by states and its second-round impact. “However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing RBI with the comfort of staying on pause mode in the foreseeable future,” the report said. During its October monetary policy review, the RBI kept the key repo rate unchanged at 6.50 percent.