RBI keeps repo rate unchanged at 6 percent amid domestic inflation accelerating to 17-month high

The Reserve Bank of India's Monetary Policy Committee kept the repo rate unchanged at 6 percent in its last bi-monthly policy review for the current fiscal on Wednesday.

The reverse repo, at which RBI borrows from banks will continue to be at 5.75 percent, it said at the sixth bi-monthly policy review.

The decision to keep key interest rates unchanged is based on the high inflationary pressures witnessed by the Indian economy. The RBI once again took a neutral stand with the interest rates over the US Federal Bank rate.

In its last review in December the central bank had kept rate unchanged while in August it had slashed the benchmark lending rate by 0.25 percentage points to 6 percent, the lowest in 6 years.

The central bank has cut GVA guidance for FY18 to 6.6 percent from 6.7 percent earlier and for FY19 the guidance has been cut to 7.2 percent from 7.4 percent.

Besides domestic inflation touching a 17-month high of 5.21 per cent against the RBI's 4 per cent target, rising crude oil prices and the government's announcement on MSP might have also put some pressure on the RBI to keep the repo rate unchanged.

Earlier, there were speculations that the RBI would change its monetary policy stance from 'neutral' to 'cautious'. The reasons were plenty and visible.