New Delhi, December 5: Springing a surprise, the Reserve Bank of India (RBI) on Thursday decided to keep its key policy rate unchanged at 5.5 per cent amid the slowing economy against all expectations.
New Delhi, December 5: Springing a surprise, the Reserve Bank of India (RBI) on Thursday decided to keep its key policy rate unchanged at 5.5 per cent amid the slowing economy against all expectations.
However, the central bank maintained its "accommodative" stance keeping room for future rate cuts.
Meanwhile, the RBI cut India's GDP growth rate forecast to five per cent down from 6.1 per cent that it had estimated in its last bimonthly meet. This comes after India's second quarter GDP growth rate slowed down to 4.5 per cent after delivering a five per cent growth rate in the first quarter.
With most analysts expecting a 25 basis points (bps) rate cut in the fifth bi-monthly Monetary Policy Committee meeting, the RBI Governor Shaktikanta Das said the timing of the rate cut was just as important and there was a need to allow time for those measures to play out which have already been taken.
It must be noted that the RBI has so far cut the repo rate by 135 points in 2019 over its last five MPC meetings.
Surprised by the move to keep policy rates unchanged, Anuj Puri, Chairman, Anarock Property Consultants, said the expected rate cut of 25 bps would have caused home loan values to fall below eight per cent for the first time ever.
"However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories. The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales," he said.
Puri added that in the present scenario, only the combined effect of lower interest rates coupled with other measures, such as a cut in personal taxes, can actually stimulate residential sales out of their current lethargy.
Mustafa Nadeeem, CEO, Epic Research, said there was a need for credit growth to pick up and that despite the 135 bps cut in policy repo rate since February 2019, the transmission in the credit market had been sluggish, while there has been partial transmission in government securities of G-Secs.
"We need to see transmission happening in lending rates across the market. The Union Budget is two months away so we believe we can see certain measures post-Budget," he said.