RBI keeps repo rate unchanged

Reserve bank of India (RBI) has kept the benchmark repo rate unchanged at 5.5% in its August monetary policy meeting. The central bank also maintained its neutral policy stance. The decision will disappoint Indian equity markets. The probable reason for the central bank not cutting its interest rate is that it may cause further depreciation in the value of Indian currency against US dollar.

The Indian currency is also under pressure against the US dollar because of the continued absence of an India-US trade deal.  Value of a currency may go down against other currencies if its interest rate goes down vis-à-vis interest rate of other countries.

RBI Governor, Sanjay Malhotra, while releasing the monetary policy statement today, said that all six members of the Monetary Policy Committee (MPC) voted in favor of keeping interest rate unchanged. Repo rate is the rate at which the central bank lends to banks. It serves as the benchmark rate of interest in the Indian economy.

Government capital expenditure supporting the economy, RBI governor said

The central bank said that domestic economic growth continues to hold up. It added that domestic economic growth is evolving around the lines expected by it. Some economic indicators however showed mixed signs in May and June. Rural consumption is resilient. But urban discretionary spending remains tepid. Government capital expenditure is supporting the Indian economy.

After this monetary policy announcement, at 10:30 a.m. Indian time, Nifty 50 is down by 48.60 points or 0.20%. Sensex is down by 88.33 points or 0.11%.

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Source: RBI