Mumbai: The Reserve Bank of India’s (RBI) rate-setting panel has announced its decision to maintain the repo rate at 6.5 percent for the third consecutive time. This decision was unveiled by RBI Governor Shaktikanta Das during the press briefing after the conclusion of the three-day Monetary Policy Committee (MPC) meeting. The committee unanimously agreed to retain the policy rate, highlighting the central bank’s vigilance towards the evolving economic landscape.
Governor Das stated, “The MPC decided to remain watchful and evaluate the situation.” This determination to closely monitor the economic indicators underscores the RBI’s cautious approach amid uncertain global conditions and domestic dynamics. The RBI’s decision is influenced by the intention to balance growth and inflation while safeguarding the stability of the financial system.
The RBI has also sustained its stance on withdrawing accommodation, with a majority of five-to-one. This approach is aimed at ensuring that the headline inflation remains within the targeted range of 4 percent. Governor Das emphasized, “With monetary transmission still underway and headline inflation remaining higher than the 4 percent target, the MPC decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.”
Explaining the rationale behind maintaining the repo rate, Governor Das highlighted the impact of the cumulative rate hikes totaling 250 basis points that the MPC has implemented. These rate hikes are gradually influencing the broader economy, contributing to the central bank’s policy effectiveness. Despite facing headwinds from weaker external demand, the domestic economic activity has displayed resilience, and this momentum is expected to endure.
Governor Das further emphasized the MPC’s steadfast commitment to steering inflation towards the 4 percent target and anchoring inflation expectations. This commitment reflects the central bank’s dedication to fostering a stable economic environment conducive to sustainable growth.
On the inflation front, the RBI has revised its forecast upwards to 5.4 percent from the previous projection of 5.1 percent. This adjustment is attributed to the rising prices of essential commodities such as vegetables, cereals, and pulses. The inflationary pressures emanating from these sectors have necessitated a reassessment of the inflation outlook.
The decision to keep the repo rate unchanged aligns with the RBI’s objective of achieving price stability while supporting economic growth. This move is in line with the central bank’s cautious approach to avoid disrupting the nascent recovery in the wake of the COVID-19 pandemic. The policy stance underscores the RBI’s commitment to fostering a conducive environment for sustainable economic expansion while guarding against inflationary risks.
In conclusion, the RBI’s decision to maintain the repo rate at 6.5 percent for the third consecutive time reflects a measured and prudent approach to steer the Indian economy through a dynamic global landscape. The central bank’s emphasis on inflation management, growth support, and financial stability underscores its role as a proactive custodian of the country’s economic wellbeing. As India continues its journey of economic recovery, the RBI’s actions will remain crucial in shaping the trajectory of growth and stability.
