Business / RBI keeps repo rate unchanged at record low of 4% for 8th time in a row

New Delhi: The Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) on Friday kept the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent, maintaining an accomodative stance on part of the central bank even as the economy is showing signs of recovery after the second coronavirus disease (Covid-19) wave. Announcing the October bi-monthly monetary policy statement at 10am on this day, RBI governor Shaktikanta Das said, “Monetary policy stance remains accommodative as long as necessary to revive and sustain growth and mitigate the impact of the Covid-19 pandemic, while ensuring inflation remains within the target.”

This is the eighth time in a row that the MPC headed by RBI governor Shaktikanta Das has maintained the status quo. The RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

On Friday, the Reserve Bank of India also retained the projection for real GDP growth at 9.5 per cent for the financial year 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 FY 2021-22. The real GDP growth for Q1 of FY 2022-23 was projected at 17.2 per cent. Addressing the press on Friday, the RBI governor said, “We have decided to maintain the status quo on policy repo rate unchanged at 4 per cent. The reverse repo rate remains at 3.35 per cent.”

The recovery of the Indian economy is gaining traction, he said, adding that it is in better shape than the outlook in the last MPC meeting. “Growth impulses are strengthening and the inflation trajectory is more favourable than anticipated,” said RBI governor Shaktikanta Das. “We hope to sail towards normal times, due to resilience of economic fundamentals of our economy.”

The Consumer Price Index (CPI) inflation rate for the financial year 2022 was projected at 5.3 per cent, while the CPI inflation rate for Q1 of the FY 2022-23 was projected at 5.2 per cent. Amidst rising fuel prices, retail inflation stood at 5.3 per cent in August.

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 lower tolerance of 2 per cent.