January CPI inflation eases but remains above 5%; December IIP shrinks but beats estimates

RBI’s monetary policy meet: Inflation, crude oil prices may force central bank to keep repo rate unchanged

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The Reserve Bank of India’s six-member Monetary Policy Committee is set to meet on December 5-6 for the fifth bi-monthly policy review. Reports suggest that the central bank is unlikely to change repo rate despite India’s economic recovery – 6.3 per cent GDP growth in July-September quarter – and Moody’s ratings upgrade in 14 years. Some bankers and economists are also expecting status quo on repo rate citing factors ranging from inflation to rising crude oil prices to federal reserve’s rate cut.
Inflation is one such factor that the RBI keeps -among other things- at the top while considering the policy change. In last policy meet, when country’s GDP slipped down to its lowest – in last 13 quarters – of 5.7 per cent, there were some calls for lowering interest rate to raise market demand for growth recovery. However, RBI governor said that the growth was mportant, but not at the cost of inflation.