RBI increases repo rate by 25 bps to 6.25%

“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 per cent within a band of +/- 2 per cent, while supporting growth,” RBI said in its second Bi-monthly Monetary Policy Statement, 2018-19.

The MPC noted that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed. Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code.

However, geo-political risks, global financial market volatility and the threat of trade protectionism pose headwinds to the domestic recovery. It is important that public finances do not crowd out private sector investment activity at this crucial juncture. Adherence to budgetary targets by the Centre and the states—which appears to be the case thus far—will also ease upside risks to the inflation outlook considerably, the statement said. (RKS)

Fibre2Fashion News Desk – India