RBI keeps repo rate unchanged at 6.5%

05 October, 2018, 14:14 | Author: Gerard Cortez
  • RBI Governor Urjit Patel in Mumbai Friday

Gandhi Wednesday hit out at Prime Minister Narendra Modi questioning his silence over the falling value of the Indian Rupee.

The rupee was quoted 55 paise lower at 74.13 against the dollar soon after the RBI announced its monetary policy, reported PTI.

"Till when will the 56-inch chest be on "silent mode".

Adding to the bullish mood, Federal Reserve chairman Jerome Powell said on Wednesday that the central bank may raise interest rates above an estimated "neutral" setting as the "remarkably positive" USA economy continues to grow.

Investors remained concerned over sustained foreign capital outflows and soaring crude oil prices that crossed the Dollars 85 per barrel. Indonesia has a large current account deficit stemming from its oil imports.

The central bank retained the repo rate unchanged at 6.50 per cent, while the reverse repo rate also stayed at 6.25 per cent.

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He said: "You can not wish away the depreciation in the rupee if you are a current account deficit country". Also, it is up to the commercial banks either they want to keep interest rates 'stagnant or want to raise them.

"The RBI policy announcement of keeping rates unchanged is a surprise", said Abhimanyu Sofat, head of research, at brokerage firm IIFL Securities Ltd, adding that if crude prices continue to surge then RBI may have to may have to frontload rate hikes.

She said: "For bond markets, a 25 bps hike accompanied by a hawkish stance could trigger the 10-year bond yield to rise to 8.25 percent".

Oil prices stood around four year highs on Thursday. "Raising the repo rate will increase the real interest rates and help in attracting fresh foreign inflows which will help in containing the rupee".

Oil prices firmed near the highest level in nearly four years on expectations of a tighter market once United States sanctions on Iran are effective next month.

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