RBI Springs A Surprise, Keeps Repo Rate Unchanged At 5.15 Per Cent

The Monetary Policy Committee (MPC) of the RBI (Reserve Bank Of India) at its meeting today (December 5, 2019) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent.

Repo rate is the rate at which the RBI lends money to commercial banks, in case of any shortfall of funds.

The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

RBI said that the decisions are 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 also projected GDP growth forecast for FY20 at 5 per cent. It had earlier forecast growth at 6.1 per cent

In its October meet, the RBI had cut interest rate by 25 bps to 5.15 per cent.

Many experts believe that there was a strong case for cutting rates and letting inflation rise a bit even if real interest rates fall to zero or negative territory.