New Delhi, August 1: The monetary policy committee (MPC) of the Reserve Bank on Wednesday hiked repo rate by 25 basis points to 6.50 per cent in its third bi-monthly monetary policy review of 2018-19. Soon after, RBI Governor Urjit Patel held a press meet and said that the MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis. “We are possibly at the beginning of currency war”, he said. Earlier in June, the RBI's six-member MPC had hiked the repo rate by 25 basis points to 6.25 percent and reverse repo rate to 6 percent.

The RBI Governor informed that retail inflation, measured by the year-on-year change in the CPI, rose from 4.9% in May to 5 per cent in June and industrial growth strengthened in April. He said in the second bi-monthly resolution of 2018-19, CPI inflation for 2018-19 has been projected at 4.8-4.9% in H1 and 4.7% in H2.

The RBI in its statement said even as inflation projections for the second quarter have been revised marginally downwards the June statement, projections for the third quarter onwards remain broadly unchanged. Patel said inflation is projected at 4.6% in Q2, 4.8% in H2 of 2018-19 and 5.0% in Q1 for 2019-20, with risks evenly balanced. “Crude oil prices, which remained volatile and elevated in May-June on a delicate demand-supply balance, eased modestly in the second half of July”, Patel added.

The RBI Governor said the FDI improved in the first two months while investment remained broadly firm.  He said the increased FDI flows in recent months and continued buoyant domestic capital market conditions bode well for investment activity.

It must be noted that the repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds. The RBI Governor said GDP is projected at 7.4 per cent. “For the first time, the projection for inflation for Q1 for 2019-2020 has been given and it is placed at 5% excluding HRA impact CPI inflation at 4.4% in Q2 of this fiscal year & 4.7%-4.8% in second half of this fiscal and 5% in the first quarter in 2019-2020”, Patel said.

The RBI Governor informed that on the domestic front, Monetary Policy Committee took note in a rise in retail CPI inflation for the 3rd consecutive month in June, food inflation remained muted, other components recorded moderate to sharp price increases. He further added saying that households reported uptick in inflation expectations, manufacturing and services firms indicate elevated input costs and wage growth, the organised sector remained firm. “Turning to the growth outlook, various indicators suggest that economic activity has continued to be strong.

(The above story first appeared on LatestLY on Aug 01, 2018 03:25 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).