In a rather unexpected move, RBI kept the Repo rate unchanged at 7.75%. More than 60% of experts predicted a rate hike of at least 25 basis points or 0.25% in order to contain inflation.
RBI said that inflation could come down in the coming few months. It also said liquidity has improved in the markets. Sensex and Nifty have cheered this move and are already up and moving. Reverse repo stays at 6.75% and MSF stays at 8.75%.
“The policy decision is a close one. Current inflation is too high. However, given the wide bands of uncertainty surrounding the short term path of inflation from its high current levels, and given the weak state of the economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty,” the Reserve Bank of India said in a statement.