RBI keeps repo rate constant at 6.5%

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The Reserve Bank of India’s monetary policy committee left the repo rate unchanged during its meet on Friday.

The six-member committee headed by Governor Urjit Patel decided to keep the repo rate constant at 6.5 percent, after inflating the rates in its last two successive policy meetings.

Repo Rate“This is a risky move by the Reserve Bank of India (RBI) since the market was positioned for a rate hike, purely as a rupee defence. In its absence, currency and asset markets could see sharper corrections. A narrow focus on inflation targets perhaps not desirable in the middle of a financial crisis. Change instance suggests that the rate hike could still come in the coming months,” said Abheek Barua, Chief Economist, HDFC Bank on RBI Policy.

“Contrary to the market expectation of at least a 25 bps rate hike RBI today has kept all the key rates unchanged. At the same time, RBI has changed the stance of monetary policy from neutral to calibrated tightening. Interestingly, RBI has also revised the inflation forecast downward and kept the growth forecast unchanged,” Sujan Hajra, Chief Economist, Anand Rathi Financial Services Ltd.

A total of four members out of six in the committee voted in favour of the status quo. While member Chetan Ghate had voted in favour to increase in repo rate by 25 basis points,  Dholakia maintained a ‘neutral’ stance.

“This is a welcome news for the housing sector as status quo on rate hike will give the right boost to the sector which has started to do well as evident from solid numbers of new launches and absorption numbers in the last few quarters. We expect with the festive season kicking in, there will be further growth in housing demand for projects by renowned developers,” Prasoon Chauhan, CEO, HomeKraft, an ATS company said.

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