Rate cut not warranted to achieve 5% inflation by March: Urjit Patel

Backing the Monetary Policy Committee (MPC) decision to keep the key lending rate unchanged at 6.25 per cent, RBI Governor Urjit Patel on Wednesday said that a cut was not warranted at this juncture, given the 5 per cent inflation target to be achieved by March end.

"MPC was of the view that given the 25 bps cut in October and a total of 125 bps since January 2015, a further cut was not warranted at this juncture," Patel said at the press conference after the monetary policy was announced on the RBI website.

He said that the committee felt it was important to achieve the 5 per cent consumer price index inflation target by March 2017.

The Reserve Bank of India (RBI) on Wednesday kept the repurchase rate, or the short-term lending rate charged by the central bank on borrowings by commercial banks, unchanged at 6.25 per cent in its first policy review after demonetisation. The reverse repurchase rate also automatically stands lowered to 5.75 per cent.

The move came as a surprise as the industry was expecting anywhere between 25-50 basis points (bps) cut as the banks are flush with cash after the November 8 demonetisation move.

--IANS

mm/vd