RBI keeps repo rate unchanged at 4% and FY22 GDP growth rate projection at 9.5% – ET Auto

RBI governor Shaktikanta Das

New Delhi: Amid global scare due to new coronavirus variant Omicron and stubborn inflation, the Reserve Bank of India (RBI) opted for status quo on policy rates. RBI governor Shaktikanta Das left the interest rate unchanged and maintained an accommodative stance on Wednesday. This implies that the central bank may go for more rate cuts in future if needed to support the economy.

The statement follows the three-day review meeting of the six-member Monetary Policy Committee, or the rate-setting panel, of RBI, headed by Das, which began on Monday.

The central bank has kept the repo rate unchanged at 4%, the reverse repo rate also remains unchanged at 3.35%. The MPC voted unanimously 5:1 to maintain an ‘accommodative’ stance.

One basis point is one-hundredth of a percentage point. The reverse repo rate is the rate at which banks park excess funds with RBI and reverse repo is the rate at which it borrows from them.

RBI had kept the benchmark policy rate unchanged in October. This is the eighth consecutive time that RBI maintains status quo.

It has retained projections for real GDP growth at 9.5% for FY22. “The Indian economy hauled itself out of its deepest contraction; we are better prepared to deal with COVID-19,” the RBI Governor said following the MPC meeting. The central bank has however revised its Q3FY22 GDP growth to 6.6% from earlier 6.8% and cut Q4FY22 GDP to 6% from 6.1%. Meanwhile, the RBI has cut Q4FY22 GDP to 6% from 6.1% earlier; and FY22 CPI inflation target has been maintained at 5.3%.

“We hold a strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy – COIVD-19. The domestic economic outlook is somewhat clouded by the Omicron variant,” Das added.

He further said that price stability remains a cardinal principle of monetary policy.

“The persistence of CPI inflation excluding food & fuel since June 2020 is an area of policy concern in view of input cost pressures that could rapidly be transmitted to retail inflation as demand strengthens,” he said.

He also pointed out that the tax cuts on petrol and diesel should support consumer purchasing power. “Recent reductions in excise duty & state VAT on petrol and diesel should support consumption demand by increasing purchasing power. The government consumption is also picking up from August, providing support to aggregate demand,” Das added.

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The Reserve Bank Governor-headed Monetary Policy Committee (MPC) is scheduled to meet during December 6-8, 2021. The decision of the rate setting panel would be announced on Wednesday (December 8). The central bank had kept the benchmark policy rate unchanged in October.

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