RBI keeps repo rate unchanged at 4%; maintains accommodative stance

 

The RBI MPC voted unanimously to keep the key policy rate unchanged

The Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday decided to keep repo rate unchanged at 4 per cent. The reverse repo rate stays at 3.35 per cent.

RBI Governor Shaktikanta Das said, "The MPC decided to continue with accommodative stance of the monetary policy as long as necessary, at least till the current financial year and into next year to revive growth on a durable basis & mitigate the impact of Covid-19 while ensuring that inflation remains within target."

He further said that the MPC was of the view that inflation is likely to remain elevated with some relief in the winter months from prices of perishables and bumper kharif arrivals. Speaking on GDP growth Das said, "The real GDP growth for 2021 is projected at minus 7.5 per cent. The recovery in rural demand is expected to strengthen further while urban demand is also gaining momentum,"

The RBI last changed policy rate on May 22. This is the third time in a row that the central bank has decided to maintain status quo.

The decision comes in the backdrop of the September quarter Q2 GDP turning out to be better than RBI's earlier projections. GDP contracted by 7.5 per cent in the July-September quarter, lower than the central bank’s prediction of 8.6 per cent.

Experts had earlier indicated that the stubborn retail inflation, which remained above the comfort level of the RBI of around 4 per cent, will refrain the central bank from reducing the interest rate.