Report rate, reverse repo rate remain unchanged

Monetary policy review RBI keeps repo rate unchanged at 6.5

The Central Bank of the Republic of Turkey (CBRT) will continue to effectively use all policy instruments at hand to maintain price stability in 2019, according to its new fiscal and monetary policy for the new year announced Wednesday.

The RBI has previously projected inflation at 3.9-4.5 percent by the end of March and growth at 7.4 percent for the current fiscal year to March 31. This is the second time in a row that RBI has maintained status quo on interest rates. The Central bank pegged India's gross domestic product (GDP) growth rate for the financial year of 2018-19 at 7.4 per cent and 7.2 per cent in H2.

Since then the RBI's pause on rates has been in contrast to other Asian central banks, including South Korea, Philippines and Indonesia, that have raised rates.

While there was no rate action, the RBI said banks' Statutory Liquidity Ratio (SLR), which is a slice of deposits that banks have to invest in Central and State government securities, will be reduced by 25 basis points every quarter, beginning January 2019, until it reaches 18 per cent of deposits from 19.5 per cent now.

The rupee eased to 70.60 to the dollar from 70.50 before the policy statement, while the broader Nifty was down 0.8 percent at 3:39 pm.

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But, there are now clearer economic reasons for India to avoid going higher, analysts say.

Inflation remains benign, easing to a 13-month low of 3.31 percent in October. Economists suggested that the RBI kept its stance unchanged as it may be too early to alter its stance. A pause in rate hikes would also be welcomed by Prime Minister Narendra Modi's ruling party as it prepares for an election that must be called by May.

Policymakers have to nurse the shadow banking sector after a series of debt defaults by a major infrastructure lender.

"Inflation is likely to pick up later next year mostly driven by food balanced against some beneficial effect of lower commodity prices", said Prachi Mishra, India chief economist at Goldman Sachs, in Mumbai.

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