RBI leaves key Repo rate unchanged at 5.15% - USD/INR unfazed around 71.20

At its sixth bi-monthly monetary policy meeting for FY 2019/20 held this Thursday, the Reserve Bank of India (RBI), the Indian central bank, maintained its benchmark interest rate, Repo rate, at 5.15%, meeting markets’ expectations.

Key Details:

Reverse repo rate stays at 4.90%.

Retains 'accommodative' monetary policy stance as long as it is necessary to revive growth.

All six monetary policy committee members voted in favour of keeping rates on hold, retaining stance.

GDP growth projected at 6% for 2020/21, 5.5-6% in h1 and 6.2% in Q3.

Headline inflation for q4 2019/20 revised up to 6.5%, seen at 5.4-5.0% in H1 2020/21 and 3.2% in Q3 of 2020/21.

MPC recognises there is policy space available for future action.

Outlook for inflation is highly uncertain at this juncture.

Government emphasis on boosting rural economy, infrastructure should help boost growth potential in near-term.

Will remain vigilant about potential generalisation of inflationary pressures

Policy transmission across money markets, private corporate bond mkt has been sizable; gradually improving in the credit market.

Economic activity remains subdued, few indicators that have moved up recently are yet to gain traction in a broad-based manner.

To conduct long-term repo ops of one year, three-year tenors of appropriate sizes up to a total of 1 trln rupees at the repo rate.

FX Implications

The Indian rupee showed little reaction to the expected no rate change decision, keeping its offered tone intact vs. the US dollar. USD/INR trades near 71.22, up 0.07% on the day.