RBI holds rates as it cuts inflation forecast


MUMBAI • India’s central bank kept interest rates unchanged for a second straight meeting as inflation and economic growth slowed in Asia’s third-largest economy.

The benchmark repurchase rate will stay at 6.5%, the Reserve Bank of India (RBI) said in a statement in Mumbai yesterday, in line with most of the forecasts in a Bloomberg survey. The RBI, which raised rates twice this year, retained its “calibrated tightening” policy stance.

The decision is bound to appease the government, which wants banks to continue lending to bolster flagging growth before a general election next year.

Inflation remains benign, easing to a 13-month low of 3.31% in October. At the same time, the economy is weakening, with growth slowing to 7.1% in the three months through September after breaching the 8% mark in the previous quarter.

A liquidity crunch in the banking system, stemming from problems in the shadow- banking sector, is starting to hit consumer spending.

In a bid to free up resources available to banks for lending, the RBI lowered the reserves they are compulsorily required to hold in the form of government securities.

The RBI lowered inflation forecast for the second half of the fiscal year that ends in March 2019 to 2.7% to 3.2% from a range of 3.9% to 4.5%.

That is below the medium-term target of 4%. The GDP estimate for the current fiscal year was retained at 7.4%. That has remained the same as in October.