Why RBI Didn't Change Repo Rate?

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If you keep an eye on the finance news, you must be aware of the unchanged repo rate. While, this decision by the Reserve Bank of India must be having some reason to back it, what are those reasons?

Inflation

Upon noticing the past trend and slowly rising prices of almost all the products, ranging from electronics groceries, concern by the central bank was raised. As a response, RBI expressed that with the base effect, inflation rate may reverse and turn unfavorable in December and February.

Wait and watch after demonetization

Since the impact of demonetization and cash ban is still playing out, as per RBI, it still needs to wait and watch the impact before taking any action. There are expectations of disruptions of cash-intensive sectors, and a decision like repo rate, must not make the situation worse.

Global uncertainty

Growing turbulence in the financial market across globe ain’t showing any sign of stability. Emergence of geopolitical risks and the menace of financial market volatility, is a deciding factor of fiscal policies all over the world, and this impacted RBI’s decisions as well.

Fiscal shrewdness

As opposed to all the above mentioned points, it is said that RBI should have thought of the decisions by Finance Minister Arun Jaitley and about the effect of lower rates.

Anand Radhakrishnan, CIO – Equity, Franklin Templeton Investments, India, recently explained that the target that is set by the finance ministry and RBI can be looked upon as something to feel motivated and something positive, as it would mean lower market borrowings (of which, Indian finance system is in dire need of). The finance ministry, Anand Radhakrishnan, and various other financial firms expected softer interest rates as a decision of RBI.

All that being and said, RBI’s each decision impacts the complete financial and economical figure of the nation and hence must be understood exhaustively.