“The MPC decided unanimously to keep the repo rate unchanged at 6.5%,” RBI governor Shaktikanta Das said in a presser on Friday.
This is the fourth time that the RBI’s MPC has made no change in the repo rate. The repo rate is the interest rate at which the RBI lends to other banks.
“India is poised to be the new growth engine of the world,” RBI governor Shaktikanta Das said.
The RBI also upheld its policy stance of “withdrawal of accommodation” to guide inflation toward the MPC’s target while still bolstering economic growth.
During its last three meetings in April, June, and August, the RBI maintained the repo rate at a steady 6.5 per cent. The repo rate is the interest rate at which the RBI lends to other banks.
Starting in May 2022, the Reserve Bank initiated a series of incremental increases in the policy rate in response to the Russia-Ukraine war, reaching 6.5 percent by February this year. Subsequently, the rate has remained unchanged in the past three bi-monthly monetary policy reviews.
The MPC has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.
The government has entrusted the Reserve Bank with the responsibility of maintaining the Consumer Price Index (CPI) based retail inflation at 4 percent, with a permissible range of 2 percent on either side. However, retail inflation stood at 6.83 percent in August, surpassing the RBI’s acceptable threshold.
Das said the MPC will remain watchful of inflation and remains resolute to its commitment to align inflation to the targeted level.
Economists expect inflation to gradually ease toward the end of the year, although remain above the midpoint of the RBI’s target. Samiran Chakraborty, an economist with Citigroup Inc, forecasts inflation will slow to 5.3% in September, although “risks of inflationary pressure from cereals and pulses would be difficult to ignore,” he said.
The monetary policy committee (MPC) comprises three external members—Shashanka Bhide, Ashima Goyal, and Jayanth R. Varma—and three RBI officials, namely governor Shaktikanta Das, Rajiv Ranjan (executive director), and Michael Debabrata Patra (deputy governor).
(With inputs from agencies)
