Policy Push: RBI's MPC retains rates, accommodative stance

Source :IANS
Author :IANS
Last Updated: Fri, Oct 8th, 2021, 12:33:47hrs
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Mumbai: The Reserve Bank of India (RBI) retained its key short-term lending rates during its October monetary policy review of FY22.

The growth-oriented accommodative stance was also retained to give a push to economic activity.

The Monetary Policy Committee (MPC) of the central bank voted to maintain the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

Likewise, the reverse repo rate was kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the bank rate at 4.25 per cent.

It was widely expected that MPC would hold rates and the accommodative stance.

The RBI also retained the FY22 projection for real GDP growth at 9.5 per cent.

RBI Governor Shaktikanta Das pointed out that GDP is expected to grow at 7.9 per cent in Q2, 6.8 per cent in Q3, 6.1 per cent in Q4 and 17.2 per cent in Q1FY23.

On the inflation front, the RBI lowered FY22 retail inflation projection for the ongoing financial year to 5.3 per cent from the previous estimate of 5.7 per cent.

Das said that consumer price inflation softened during July-August, moving back into the tolerance band with an easing of food inflation.

This is corroborating the Monetary Policy Committee's (MPC) assessment of the spike in inflation in May as transitory, he said.

Furthermore, he expects a further softening can be expected in CPI-based inflation.

"Overall, the CPI headline momentum is moderating which, combined with favourable base effects in the coming months, could bring about a substantial softening in inflation in the near-term," Das said.

He pointed out that CPI inflation is projected at 5.1 per cent in Q2, 4.5 per cent in Q3, and 5.8 per cent in Q4 of 2021-22, with risks broadly balanced.

The projection on inflation for Q1 of next fiscal (FY23) is 5.2 per cent.

"We are watchful of the evolving inflation situation and remain committed to bring it closer to the target in a gradual and non-disruptive manner."

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