RBI Governor Urjit Patel cuts repo rate by 25 bps to 6.25%

RBI Governor Urjit Patel-led Monetary Policy Commitee (MPC) cut repo rates by 25 bps to 6.25% and did not change the Cash Reserve Ratio (CRR) at 4%.

In his maiden monetary policy review as a Governor, Patel has adopted an accommodative stance and is in resonance with the objective of achieving consumer price index (CPI) inflation at 5% in 2016-17.

Patel wants to propel growth and there is a medium-term target of 4% within a band of +/- 2 per cent.

The reverse repo rate under the LAF is at 5.75% and the marginal standing facility (MSF) rate and the Bank Rate to 6.75%.

Retail inflation elevated by a sharp pick-up in the momentum of food inflation overwhelming favourable base effects during April-July.

Inflation excluding food and fuel (including petrol and diesel embedded in transportation) has been sticky around 5%.

Reserve Bank’s inflation expectations survey of households. Input costs in the manufacturing sector, including staff costs, have firmed up slightly as evident in various surveys, but the presence of considerable slack has restrained their transmission into corporate pricing power.

The MPC also included the 7th pay commission panel.