Mumbai :loomberg) - India’s central bank left interest rates unchanged for a second straight meeting, as surging inflation kept policymakers from easing again to support economic growth.
The repurchase rate was maintained at 5.15 per cent. The six-member Monetary Policy Committee voted unanimously on the decision, while retaining its accommodative stance, the Reserve Bank of India said in a statement.
“The outlook for inflation is highly uncertain at this juncture,” the central bank said, citing the upward trajectory of prices. “The MPC recognises that there is policy space available for future action.”
Inflation at 7.35 per cent in December was well above the upper end of the central bank’s 2-6 per cent target band and the RBI sees the outlook for prices remaining uncertain because of rising prices of milk and pulses, volatile oil and rising input costs for services.
The central bank raised its inflation projection for the six months to September to 5-5.4 per cent from 3.8-4 per cent seen previously.
No big bang
With the government’s budget this month failing to deliver any big-bang fiscal boost, the onus is now back on the RBI to spur the economy. But higher-than-expected inflation has left the consumer price-targeting central bank with few conventional tools, prompting it to resort to unorthodox measures such as the “Operation Twist” - buying long-end debt while selling short-tenor bonds - to keep borrowing costs down.
The central bank acknowledged that economic activity continues to be subdued, saying “the MPC felt it appropriate to maintain status quo,” given the evolving growth-inflation dynamics.
Business confidence in manufacturing and services sectors has also improved, with the composite purchasing managers’ index reaching its highest in seven years in January.
“The few indicators that have moved up recently are yet to gain traction in a more broad-based manner,” the RBI said, while flagging downside risks from the coronavirus. The pandemic may “impact tourist arrivals and global trade.”