RBI has kept rates unchanged at 6.5%. GDP forecast for this fiscal is unchanged at 7.6%. Inflation forecast reduced to 3.8-4.5% for Sept-March period of this fiscal. Inflation could inch higher to 4.8% in Q1 2019.
RBI Governor added that interest rate increase is only targeted at inflation management and cannot be a tool to target exchange rate which will be determined by market forces. RBI has given an implicit message that Rupee weakness is acceptable and could correct the distorted trade balance.
Rupee breached 74, Equity indices closed 2.67% down.