The Reserve Bank of India (RBI), as was widely expected, left the key lending rate unchanged at a fourth policy meeting in a row on Friday with a focus on growth even though inflation is currently above its comfort level.
“MPC (Monetary Policy Committee) voted unanimously to leave the repo rate — the rate at which the central bank lends short-term funds to banks — unchanged at 6.5 per cent,” RBI Governor Shaktikanta Das said while announcing the Committee’s decision.
The MPC also decided that Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates are also left unchanged at 6.25 per cent and 6.75 per cent, respectively.
“Global headline inflation is easing but rules above the target of many major economies. Sovereign bond yields have firmed up, US dollar has appreciated, and equity markets have corrected,” Das said at the press conference,
The country’s MPC took a unanimous decision to leave the repo rate untouched.
At the same time Governor Das said, “the committee remains resolutely focused on aligning inflation to the 4 per cent target on a durable basis”.
The RBI also maintained its policy stance of “withdrawal of accommodation” to ensure inflation progressively aligns with the committee’s target while remaining supportive of economic growth.
Annual retail inflation eased to 6.83 per cent in August, from a 15-month high of 7.44 per cent in July, but remained well above the central bank’s 2 per cent-6 per cent comfort zone.
The erratic monsoon has hit production of vegetables, cereals and fruits triggering a sharp increase in food prices. Global oil prices have also been soaring which has further pushed up the inflation rate.
On GDP growth, the MPC’s forecast for 2023-24 was left unchanged at 6.5 per cent.
The overall tone of the bi-monthly monetary policy remained tilted towards the inflation fight. In the October MPC decision, Das said that CPI inflation forecast for 2023-24 left unchanged at 5.4 per cent.
He also mentioned that throughout the third quarter, food inflation pressure may not seem to change, while core CPI eased 140 basis points from its earlier peak in January.
The retail inflation fell to 6.83 per cent in August as vegetable prices cooled compared to the previous month but it was still above the RBI’s tolerance band of 2-6 per cent.
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