RBI Policy: MPC keeps interest rates unchanged, pegs FY21 real GDP growth -9.5%

Reserve bank of India

MUMBAI: The Reserve Bank of India (RBI) on Friday kept the repo rate, the key interest rate at which it lends to commercial banks, unchanged at 4%, according to a statement by governor Shaktikanta Das. The central bank sounded an ominous note on the growth outlook for the country, even as it pretty much echoed what rating agencies have also warned about earlier.

The RBI’s MPC has pegged the real GDP growth for FY21 to contract by 9.5%.

The decision to keep the interest rates unchanged is in line with market expectations as inflation has remained above 6% – the higher end of the central bank’s medium-term target.

The stance of the RBI will continue to be accommodative in this financial year, at least while ensuring the inflation remains within the 4% plus/minus 2% target, Das said in his address.

The reverse repo, bank rate and the marrginal standing facility rate also remain unchanged.

Silver linings are visible and the worst is behind us, Das said and India must begun its “tryst with pre-covid growth trajectory” and the focus must shift to revival.

India’s headline inflation based on consumer price index (CPI) fell to 6.69% in August from 6.73% in July, ruling out the possibility of a repo rate cut in near term. CPI inflation was at 3.28% in August 2019.

Das said the MPC felt the inflation would ease closer to its range by the end of Q4 2021.

The central bank’s six-member Monetary Policy Committee (MPC) was unanimous in its decision to stand pat on interest rates.

“In my view, it will be a three-speed recovery with individual sectors having varying paces of recovery,” Das said.

Three of the six members of the panel—Ashima Goyal, Jayanth R. Varma and Shashank Bhide–were appointed by the government earlier this week.

The RBI had rescheduled last month’s MPC meeting to this week because positions of three external members had remained vacant after the tenure of Ravindra Dholakia, Pami Dua and Chetan Ghate ended in September.

Members of the MPC are not eligible for reappointment.

News Source: livemint

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