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RBI keeps repo rate unchanged at 6.5%

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The Reserve Bank of India (RBI) on Wednesday kept the key policy rates unchanged at 6.5%. This is the second time in a row that RBI has maintained status quo on interest rates.The reverse repo rate has also been maintained at 6.25 per cent. Earlier in its bi-monthly monetary policies review held in June and August 2018, the central bank had raised the repo rate by 25 basis points (bps). Anuj Puri, Chairman, ANAROCK Property Consultants, said, “Politically, an upward revision would not have served the current Government well as the 2019 elections are around the corner.  From the economic standpoint, a hike in repo rates would have had a direct impact on home loan rates. High housing loan interest rates are known deterrents to many buyers, especially in the affordable segment where higher interest rates can and do weaken sentiment.Any move to further discourage customers from availing of bank credit would ultimate exacerbate the liquidity crunch and adversely impact the economy. From that perspective, the unchanged repo rate will at least keep the demand for housing loans at status quo.”   RBI Governor Urjit Patel-led monetary policy committee (MPC) has, however, changed its stance from 'neutral' to 'calibrated tightening'.No changes were made to the cash reserve ratio (CRR).The central bank also cut its inflation projection for H2 to 2.7-3.2% from 3.9-4.5% earlier. Ms. Manju Yagnik, Vice Chairperson, Nahar Group, said, “After hiking the repo rate twice in a row, this is a well-thought-out move by the RBI of holding the repo rate. By keeping the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent this has given a big relief to the developers as well as consumers. With the festival season coming in, this move will attract more home buyers as the interest rates on home loan will remain unchanged and it won’t have any impact on the real estate sector. This will result in a win-win situation for both developers and buyers.” Shishir Baijal, Chairman & Managing Director, Knight Frank India, stated, ‘’The decision on keeping the key policy rates unchanged is on expected lines and will be a relief for the real estate industry that has been worried over a possible rate hike adversely impacting the market. Since the last Monetary Policy Committee Meeting, there has been a big relief with the fall in crude prices and the strengthening of the Rupee, thus, reducing inflationary risk. We believe the easing inflation situation and the need to actively support growth are the primary consideration for the MPC to maintain a status quo on rates.’’

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