Mumbai: The Reserve Bank of India kept its repo rate unchanged at 6.25 percent for a third consecutive policy meeting on Thursday as it continues to guard against any potential flare-up in inflation and an uncertain global economic environment.
The RBI also announced it would raise the reverse repo rate by 25 basis points to 6 percent, narrowing the gap between the repo and the reverse repo to 25 bps.
The RBI, which unexpectedly changed its policy stance to "neutral" from "accommodative" at its last review in February, reasserted its concerns about inflation. This comes in spite of calls for the RBI to do more to aid an economy growing at less than the 8 percent needed to create full employment.
"The decision of the MPC is consistent with a neutral stance of monetary policy 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," said the RBI in the statement.
CONCERN ON FOOD PRICES
India's benchmark 10-year bond yield rose 6 basis points to 6.75 percent after the decision, but the rupee was range-bound at around 64.94 per dollar after earlier strengthening to as much as 64.8825.
The Nifty was down 0.2 percent for day, after strengthening slightly following the RBI statements.
The consumer inflation rate climbed to 3.65 percent in February from a year earlier, picking up from its lowest levels in at least five years to approach the RBI's target of 4 percent.
The RBI is concerned that food prices could spike should India experience a below-average monsoon season in the middle of the year. It is also monitoring core inflation, which has stubbornly stayed around 5 percent for several months.
India seems in good stead after attracting $8.85 billion in investment into debt and equities in March - the most since at least 2002 - sending the Nifty to a record high and the rupee to a nearly 1-1/2 year high.
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