The Reserve Bank of India's Monetary Policy Committee has left the benchmark repurchase rate unchanged at 6.50 percent at its policy review held today, in line with the consensus forecast. This rate has been increased by a cumulative 250 basis points since the initial rate hike by officials in May last year but has now been left on hold for three consecutive meetings.

Data released since the RBI's previous meeting early June have shown steady price pressures, with headline CPI inflation falling from 4.70 percent in April to 4.31 percent in May and then rising to 4.81 percent in June, still reasonably close to the mid-point of the RBI's target range of 2.0 percent to 6.0 percent. July CPI data are scheduled for release next week. Industrial production and PMI survey data have shown an improvement in economic conditions in recent months.

In the statement accompanying today's decision, RBI officials advised that they expect consumer prices will spike higher in the near-term in response to"supply disruptions due to adverse weather conditions". In particular, officials noted that rainfall has been uneven in parts of the country and promised to"maintain a close vigil on the evolving inflation scenario". They also expressed confidence in the outlook for domestic demand but reservations about external conditions.

Noting that previous policy tightening is continuing to exert an impact on economic conditions, officials concluded that it was appropriate to keep rates on hold again today. Nevertheless, they reaffirmed their resolve to aligning inflation to the mid-point of their target range and keeping inflation expectations anchored. Reflecting this resolve, they promised to"remain focused" on withdrawing policy accommodation, suggesting that upside risks to the inflation outlook remain their primary concern for now.

The Reserve Bank of India, which held rates steady at their last two meetings as inflation has cooled, are expected to hold rates steady for a third meeting in a row.

The Reserve Bank of India (RBI) issues six Bi-monthly Policy Statements a year. During these announcements the RBI will signal any shifts in its monetary stance, particularly with reference to the benchmark repo interest rate and its cash reserve ratio (CRR). The Governor will also update the Bank's view of recent economic developments and provide new forecasts for inflation and growth. A 4 percent inflation target with a +/- 2 percentage point tolerance band was formally implemented in August 2016 and will be overseen by a new six-member Monetary Policy Committee (MPC).

Although the RBI monitors many economic indicators - as indeed all central banks do - the RBI most closely monitors inflation. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity while lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or for those who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India. Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. Its function is to advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time. Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.