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The Reserve Bank of India’s (RBI) Monetary Policy Committee decided to keep MPC rates unchanged for the seventh time straight and continued with an accommodative stance, citing the need to support ongoing growth recovery amid continued uncertainty and global financial market volatility. at its bi-monthly policy.
RBI Governor Shaktikanta Das said that the MPC has decided to leave repo rate unchanged continue with the accommodative stance as long as necessary to support growth.
The announcement came after a three-day meeting of its Monetary Policy Committee (MPC). The central bank has cut policy rates by 115 basis points since February 2020.
MPC decided to maintain the status quo, that is keeping the benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review.
Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.
Das said MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.
The MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.
The second COVID wave has raised uncertainty around economic outlook and pushed potential policy normalisation further into the future.
While the economy is slowly coming back on track, economists say the RBI does not want to derail the pace of growth by tweaking the rates or stance.
Economic growth has to be sustainable before the rates are raised at a time when inflation is visibly sticky.
The price build-up in global commodities, especially for those whose prices are a pass through into domestic market, has put significant pressure on both retail and wholesale inflation since January.
Observing that economy is slowly recovery from brief hiatus, the Governor said, some of the high frequency indicators reflect recovery.