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 four consecutive meetings.

Data released since the RBI's previous meeting early August have shown headline CPI inflation rising from 4.87 percent in July to 7.44 percent in August before moderating to 6.83 percent in September. This increase in price pressures over the last two months has taken headline inflation back above the RBI's target range of 2.0 percent to 6.0 percent but has mainly been driven by higher food prices caused by adverse weather conditions. Officials had anticipated such a spike in food prices at their last meeting. Recent activity data, meanwhile, have generally shown ongoing strength in economic conditions.

In the statement accompanying today's decision, RBI officials advised that they expect headline inflation will ease further but cautioned that the outlook remains"clouded' by uncertainties" relating to domestic food prices and global energy prices. They forecast quarterly inflation will moderate from 6.4 percent in the current quarter to 5.6 percent and 5.2 percent respectively in the last two quarters of the current fiscal year.

Officials note that economic activity remains resilient and that the risks to the growth outlook are evenly balanced. They forecast GDP growth of 6.5 percent in the current fiscal year, with ongoing support from government investment spending and strong conditions in the services sector.

Today's decision to leave rates on hold again indicates that officials have discounted the significance of the recent increase in food prices and remain confident that policy tightening implemented previously will return headline inflation to its target range in due course. Upside risks to the inflation outlook, however, will likely remain a major focus for officials in upcoming meetings.

Despite a nearly 7 percent inflation rate, the Reserve Bank of India, which has held rates steady at their last three meetings, is expected to hold its policy rate unchanged once again at 6.5 percent.

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.