RBI leaves repo rate, reverse repo rate unchanged at 6 & 5.75%

The Reserve Bank of India has decided to keep the repo rate and the reverse repo rate unchanged at 6 per cent and 5.75 per cent respectively for a third straight policy meeting.

The RBI retained its "neutral" stance on the interest rates with an aim to support economic growth even as inflation accelerated to a 17-month high.

Repo rate is the rate at which the RBI lends out finances to the banking sector while the reverse repo rate is the opposite of the same.

According to experts, a hike in the interest rates would have translated into an increase in inflation and escalating crude oil prices.

The Monetary Policy Committee (MPC) of the Reserve Bank of India had kept the interest rate unchanged in December over looming concerns of price rise.

RBI Governor Urjit Patel chaired the Monetary Policy Committee meeting today at 2.30pm.

“The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth,” RBI noted.

"The policy decision is in line with our expectation along with the hawkishness that is built into the statement. While we retain status quo from RBI for FY19, a risk to our call may come from higher inflation," shared Aditi Nayar, Principal Economist, ICRA Ltd in Gurgaon.

"Despite the upward revision in the inflation forecast and concerns highlighted regarding growing inflation risks amid the crystallization of the fiscal slippage, the tone of the policy was not as hawkish as expected, given the comment that the nascent recovery needs to be carefully nurtured," Radhika Rao, Group Economist, DBS, Singapore told Reuters.

Ahead of the RBI's announcement, the Indian rupee traded down 11 paise against the US dollar at 64.14.