The Reserve Bank of India (RBI) today kept its interest rates unchanged in its sixth bi-monthly policy review with the upward inflation trend in view.
The Monetary Policy Committee (MPC) decided to:
- Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6%.
- Reverse repo rate under the LAF remains at 5.75%.
- Marginal standing facility (MSF) rate and the Bank Rate at 6.25 %.
The repo rate is the rate at which RBI lends to bank whereas the reverse repo is the rate at which RBI lends from banks. MSF is the rate at which the banks can borrow overnight funds from RBI against approved government securities.
In its press release, Rbi said "The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth."
What does CPI do?
The CPI measures the average change in price paid by urban consumers on consumer-based goods and services. The average annual change in CPI is a measure of inflation in the country.