RBI keeps policy rate unchanged; flags inflation risks, fiscal deficit

Five Monetary Policy Committee members vote in favour of status quo; one votes for 0.25% rise

The Reserve Bank of India (RBI) kept policy rates unchanged for the third consecutive time. Governor Urjit Patel indicated that the recent rise in bond yields was beyond the control of the central bank and a result of fiscal profligacy by the government and the rise in rates in advanced economies. 

Patel’s post-policy statement assumes significance for interest rates in the economy; particularly when his deputy Viral Acharya said RBI was not there to provide liquidity to manage bond prices. According to bond dealers,