RBI Keeps Repo Rate Steady At 5.15% As Retail Inflation Hits 7.35%

Mumbai: The Reserve Bank of India has kept the repo rate unchanged at 5.15 per cent in its first monetary policy since the Union Budget 2020 was introduced.

The Monetary Policy Committee also decided to continue the adjustment stance as long as it is necessary to revive growth while ensuring that inflation remains within the target.

“Based on an assessment of the current and evolving macroeconomic situation, in its meeting today (February 6, 2020), the Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 5.15 per cent under the Liquidity Adjustment Facility (LAF). As a result, the reverse repo rate under the LAF remains unchanged at 4.90 per cent and the marginal standing facility (MSF) rate and the bank rate at 5.40 per cent, ”the sixth bi-monthly monetary policy statement said.

“Turning to recent indicators, both production and import of capital goods – two key signs of investment activity – continued to contract in November / December, although at a moderate pace compared to the previous month. The centre’s revenue expenditure (excluding interest payments and subsidies) remained strong in Q3, signalling a regressive buffer to domestic demand provided by the government’s final consumption. According to the revised estimates given in the Union Budget, Q3 is expected to reduce the increase in the Centre’s revenue expenditure (excluding interest payments and subsidies) compared to Q3, ”the statement said.

Consumer expenditure on non-essential items of consumption contracted a year earlier, based on the Reserve Bank’s Consumer Confidence Survey; However, an increase in overall expenditure is expected, going forward, reflecting the rise in prices, RBI said.

The RBI Monetary Policy Committee began its three-day brainstorming meeting on Tuesday against the backdrop of the Union Budget, which plans to expand the fiscal deficit amid a slowing economy and harsh inflation. The committee has tasked the government to base retail inflation at 4 per cent (+, – 2 per cent) based on the Consumer Price Index (CPI).

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