Rupee slips over 6 paise after RBI leaves policy rate unchanged

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"It is expected that RBI will go for a rate cut by 25 bps, and maintain its accommodative stance".

Inflation of 4.6% in October was higher than the RBI's medium-term target of 4%, the first breach in more than a year.

India's central bank kept interest rates on hold on December 5, defying expectations of a sixth consecutive cut this year to jumpstart the economy after quarterly growth plunged to its lowest level since 2013. "Transmission of rate cuts still remains an issue as the positive effect of the five consecutive rate cuts is not visible in the economy", Deepthi Mary Mathew, Economist at Geojit Financial Services said in a statement earlier this week.

And while loans get cheaper for the people, the banks also reduce the interest rates on deposits.

India's economic growth according to government data has slipped to over six-year low of 4.5 per cent in the second quarter of the current fiscal mainly due to contraction in manufacturing sector output.

The committee also chose to continue with the "accommodative" stance "as long as it is necessary to revive growth, while ensuring that inflation remains within the target".

All 6 monetary policy committee members voted in favour of holding rates unchanged.

"However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture", it said.

"There is speculation that there could be further tax cuts, but it's hard to say if fiscal policy would be loosened further".

Reverse repo rate stays at 4.90 pct.

Meanwhile, the benchmark equity indices BSE Sensex and NSE Nifty pared all of their day's gains after the outcome.

The benchmark 10-year bond yield spiked sharply to 6.591 percent versus the pre-policy level of 6.4735 percent, while the partially convertible rupee currency weakened to 71.59 per dollar from 71.50 before the decision.

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