The Reserve Bank of India (RBI) kept the policy repo rate unchanged at 6% in the first bi-monthly meeting this financial year. The reverse repo rate was also kept unchanged at 5.75%.

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This meet, the RBI forecasted the inflation for Q219 to be in the 4.5-4.6% range.

The central bank had projected a CPI inflation rate of 5.1% for Q418 in the February meeting, and had expected the inflation for Q119 to be in the 5.1-5.6% range.

Domestic growth is rising and inflation is coming down, and in theory, the central bank would have cut the policy repo rate to pull up the growth further.

Also read: RBI says investment activity, capital goods production boosts FY 19 GDP estimates

Since the last meeting in February, the consumer price index (CPI) dropped to 4.4%, from 5.01% rate in January.

The inflation dropped largely because of the fall in the food inflation rate in that period.

Core inflation, however, remains bloated, giving rise to risks of the increase in inflation in the near future.

The policy repo rate is the rate at which the Reserve Bank of India lends money to commercial banks. The rate is primarily used to control inflation.

Also read: RBI meet: Uneventful policy, eventful press conference?

If the economy is witnessing an inflation, the central bank will increase the rates to disincentivise borrowing and the other way round when the monetary authorities see the need to pull up the economy's growth.

The status quo in the policy rate was predicted as the anxiety about a fiscal slippage and the deteriorating health of the banking sector remain a key worry.

Apart from this, the recent developments in the global economy remains a worry. US President Donald trump’s trade war with China, the Fed rate hike, and rising crude oil prices can overpower India’s growth prospects.

Also read: Full text of the RBI policy meet

"The tone of the policy commentary suggests that despite several uncertainties surrounding the inflation trajectory, RBI is not in a hurry to change its neutral stance of monetary policy," Sunil Kumar Sinha, Director at India Ratings & Research, said.For the impact of the repo rate on real estate Shishir Baijal, Chairman & Managing Director, Knight Frank India, said:

"In the current interest rate cycle, we have touched the lowest level and it will come as no surprise if the cycle turns. Against this background, the impetus for stimulating housing demand does not lie on interest rate alone but on other reforms and steps taken by various stakeholders. Until such time the benefitsof these measures

Chanda Kochhar, MD & CEO, ICICI Bank said:

“The significant positive in the monetary policy was the downward revision of inflation projections. The MPC also recognised that the structural reforms undertaken by the government and the pickup in credit growth are leading to a broad based cyclical improvement in the economy. The MPC has prudently voiced concerns about the possible interplay of domestic and global risk factors that could play out over the medium term. The announcement of regulatory measures like the mandatory loan component in working capital financing is a step in the right direction. Allowing non-residents into swap markets and introduction of Rupee swaptions would deepen the domestic derivative market, while also aiding product development to enable better risk management by domestic entities.”

First Published:Apr 5, 2018 2:30 PM IST