Monetary policy: RBI keeps key rate unchanged

The RBI has raised interest rates twice in August and June this year.

In its fourth bi-monthly monetary policy statement of 2018, the Reserve Bank of India (RBI) has kept the repo rate (key lending rate) unchanged at 6.5 per cent.
 
The move to maintain status quo has surprised experts as they had been expecting a hike in repo rate by 25 basis points or 0.25 per cent. 
 
Five of the six panel members voted to leave the rate unchanged.
 
The reverse repo rate or the rate at which RBI borrows from commercial banks also remained unchanged at 6.25 per cent.
 
The RBI has raised interest rates twice in August and June this year. In June, it hiked the key repo rate by 25 basis points to 6.25 per cent — first time since January 2014.
 
In August, the central bank raised rate for the second time by 25 basis points to 6.5 per cent, taking the interest rate to two year high.
 
According to a statement by RBI, trade deficit in Q1 of 2018-19 caused a slight widening of the current account deficit to $15.8 billion (2.4 per cent of GDP) as compared with $15 billion (2.5 per cent of GDP) in the first quarter of 2017-18. 
 
Net foreign direct investment (FDI) flows increased by 2.9 per cent in April-July 2018 over the corresponding period of the previous year. However, FPI flows recorded net outflows of $11.5 billion till 28 September 2018, reflecting mainly global portfolio rebalancing away from emerging market economies (EMEs), said the report. 
 
As per RBI, The growth of gross value added (GVA) at basic prices accelerated to an eight-quarter high of 8 per cent in April-June period of 2018-19.

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