Reserve bank of India keeps repo rate unchanged at 6.25%

The Reserve Bank of India in its sixth bi-monthly policy for the financial year 2016-17 on Wednesday decided to keep repo rate unchanged at 6.25%. 

Reverse repurchase rate was also left unchanged at 5.75%. RBI, however, changed its policy stance to neutral from accommodative. RBI said that it expects consumer price index or retail inflation in fourth quarter to be below 5%. 

Markets reacted sharply to the news with BSE Sensex falling over 120 points, 0.43% a 28,213.21 points at 1437 hours. Rupee, too, fell after RBI announced its monetary policy. 

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A Reuters Poll had showed 28 of 46 participants expected the RBI to cut the repo rate by 25 basis points to 6.0%, its lowest since November 2010. Another two expected a 50 bps cut. A Bloomberg poll too expected a majority of economists favouring a 25 basis points rate cut. 

John had further said, "The only time since 1970 that benchmark interest rates in India have been lower than 6% was between January 2009 and August 2010 following the 2008 global financial crisis. This time around, the global backdrop is far from similar. Inflation expectations across the developed world are rising, and interest rates are slowly rising. Therefore, with benchmark interest rates already at 6.25%, we do not believe rates can fall by more than 25bps in this cycle."