Reserve Bank Of India kept interest rate unchanged at 6.25 percent as expected, while lowering projections for inflation .Its decision to leave the repo rate approx 6 year low after the monetary policy committee meeting and reverse repo rate was also left unchanged at
6.00 percent.
The RBI cut banks' statutory liquidity ratio by 50 bps to 20 percent
of total deposits.Its projection for consumer
inflation to 2-3.5 percent in April to September, down from 4.5 percent
earlier, and to 3.5-4.5 percent in October to March, down from 5 percent
earlier.
The change in forecast comes after consumer prices rose in April at
their lowest annual rate in at least five years, slowing to 2.99 percent
from 3.89 percent in March, well below the RBI's target of 4.0 percent.
The RBI said the risks to its inflation were "evenly balanced," a
twist in its language from its statement in April when it cited "upside
risks" to inflation.
"The decision of the Monetary Policy Committee is consistent with the objective of achieving the
medium-term target for consumer price index (CPI) inflation of 4 per
cent .
Several factors are pointing to more congenial inflation, including the
likelihood of above-average monsoon rains, falling commodity prices, and
a 5 percent rally in the rupee that has made imports cheaper.
India's economy grew a slower than expected 6.1 percent in the
January-March quarter, its slowest pace in more than 2 years and down
from 7 percent in the previous quarter, slowdown was largely due to the
government's shocking decision to remove large denomination
banknotes from circulation to combat rampant tax avoidance.
As a result, the RBI adjusted its projection for growth value-added, a
measure of growth it prefers, to 7.3 percent in the year to March 2018,
down from its previous projection of 7.4 percent, with "risks evenly
balanced".