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RBI Maintains Status Quo, MPC Leaves Repo Rate Unchanged At 4%

The Reserve Bank Of India maintained the status quo and kept the repo rate unchanged at 4%

New Delhi: The Reserve Bank of India's six-member monetary policy committee (MPC) left the key rates unchanged in its bi-monthly policy review on Friday. While announcing its monetary policy changes after a three-day meeting, governor Shaktikanta Das said that the MPC voted unanimously to maintain the status quo and keep the repo rate unchanged.

The repo rate was unchanged at 4 per cent and reverse repo rate remained unchanged at 3.35 per cent.

"Monetary Policy stance remains accommodative as long as necessary to revive and sustain growth and mitigate the impact of COVID19 pandemic while ensuring inflation remains within the target," said Das. The RBI left the interest rates unchanged despite rising inflationary pressures and the depreciation of the rupee. 

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The recovery of Indian economy is gaining traction; it's in better shape than last MPC meeting. Growth impulses strengthening, inflation trajectory favourable than anticipated; hope to sail towards normal times, due to resilience of economic fundamentals of our economy, said the governor.

The projection for real GDP growth is retained at 9.5 per cent for FY 2021-22. This consists of 7.9 per cent in Q2, 6.8 per cent in Q3 and 6.1 per cent in Q4 of 2021-22. Real GDP growth for Q1 of FY 2022-23 is projected at 17.2 per cent.
 
CPI inflation is projected at 5.3 per cent for the financial year 2022. CPI inflation for Q1 of FY 2022-23 is projected at 5.2 per cent, said Das.
 
Retail inflation in August marginally eased to a fourth-month low of 5.3 per cent, within the RBI's comfort zone, while WPI-based inflation surged to 11.39 per cent in August due to costlier manufactured goods.

In view of the accommodative monetary stance, the central bank looks to support a fragile economic recovery. Policy repo rate or the short-term lending rate is currently at 4 per cent, and reverse repo rate 3.35 per cent. The benchmark repo rate is the rate at which the central bank lends short-term funds to banks.

Since the outbreak of pandemic in March 2020, RBI has cut repo rates to a record low of 4 per cent through two rate cuts of 75 bps in March 2020 and 40 bps in May 2020. Since then, the RBI didn't cut the interest rates further.

The central bank maintained the satnce in the back of gradual recovery in domestic economic conditions and increased pace of vaccination that boosted consumer sentiments and confidence.

Rating agency Moody’s had raised the sovereign credit rating outlook to stable from negative, citing improvement in the financial sector and faster than expected economic recovery.

(With inputs from ANI)

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