India’s central bank left its key interest rate unchanged at a record low and maintained its ‘accommodative’ stance as policymakers assessed that the ongoing recovery needs continued policy support.
The Monetary Policy Committee of the Reserve Bank of India, led by Governor Shaktikanta Das, unanimously decided to retain the policy repo rate at 4.00 percent.
The reverse repo rate was left unchanged at 3.35 percent, defying expectations for a hike to 3.55 percent.
The MPC decided by a majority of 5 to 1 to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.
Taking into consideration the outlook for inflation and growth, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery.
The governor reiterated that RBI actions will be calibrated and well-telegraphed.
The bank said real GDP growth at 9.2 percent for 2021-22 took it moderately above the level of GDP in 2019-20.
There is some loss of the momentum of near-term growth while global factors are turning adverse. The central bank projected 7.8 percent growth for the fiscal year 2022-23.
The bank said core inflation remains elevated and it expects headline inflation to peak in the March quarter of fiscal year 2021-22.
The RBI retained the 5.3 percent inflation forecast for the fiscal year 2022. The CPI reading for January 2022 was expected to move closer to the upper tolerance band, largely due to adverse base effects.
On the assumption of a normal monsoon, inflation is projected at 4.5 percent for the financial year 2023.
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