The Monetary Policy Committee of the Reserve Bank of India has held the repo rate at 4% unaltered. The RBI has kept rates unchanged for the seventh consecutive MPC.
MPC has agreed to keep the repo rate unchanged and maintain the accommodative stance as long as necessary to sustain growth, according to RBI Governor Shaktikanta Das. While the current reverse repo rate is 3.35 percent.
The announcement comes after the six-member MPC began a three-day review meeting on Wednesday. The majority of economists predicted the RBI’s MPC to maintain the key lending rate at 0.75%.
The MPC kept rates unchanged and maintained its accommodating stance, as expected. Despite the fact that the MPC decided unanimously to leave the rates unchanged, the continuation of the accommodative posture received a 5:1 majority of votes. It demonstrates that the inflation discussion is gaining traction. The inflation rate prediction for FY22 has been raised to 5.7 percent from 5.1 percent previously.
What are economists saying about the Monitory Policy?
The central bank maintains its belief, that a fast withdrawal of monetary policy support would jeopardize the ongoing economic recovery. As a result, economists expect the RBI to begin policy normalization only in the fourth quarter of this fiscal year.
According to Das, India is in a far better position now than it was in June of 2021. Das, also added that the vaccine production and administration are steadily increasing; yet, we must not let our guard down and remain watchful against the prospect of a third wave. According to the Governor of RBI, rural demand would drive private consumption, while urban demand will drive services and pent-up demand.
The RBI’s Governor reiterated that the RBI’s main priority will be “to support growth within the context of financial stability.” The RBI is rightfully concerned that any shift away from the current pro-growth monetary policy could “kill the embryonic and shaky recovery.” “The central bank’s communication speaks well for the economy’s growth impulses to continue,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. For more such updates, keep watching this space!