RBI Keeps Repo Rate Unchanged At Record Low Of 4% For 9th Time In A Row

Mumbai: The RBI’s Monetary Policy Committee (MPC) on Wednesday kept the repo rate unchanged at a record low of 4% and reverse repo rate at 3.35% amid concerns over the new COVID-19 variant Omicron.

“The Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate at 4 per cent and the stance remained lenient. The marginal standing facility (MSF) rate and the bank rate remained unchanged at 4.25 per cent. Reverse repo rate also remains unchanged at 3.35 per cent,” Reserve Bank of India Governor Shaktikanta Das informed on Wednesday.

“Noting that economic activity is broadly evolving in line with its assessment in October, the MPC was of the view that the sharp and sustained reduction in new COVID-19 infections and the rise in vaccination coverage are contributing to consumer confidence and business optimism,” said Governor Das.

Acknowledging persistently high core inflation, the central banker said, “The economy is still not strong enough to be self-sustaining, hence the need for policy support. The continuation of high core inflation (food and fuel) is an area of ​​concern.”

“Recent reductions in excise duty & state VAT on petrol and diesel should support consumption demand by increasing purchasing power. Government consumption is also picking up from August, providing support to aggregate demand. These would alleviate, to an extent, the domestic cost-push build-up,” he added.

RBI retained its GDP forecast for the financial year 2021-22 at 9.5%, up from 6.6% in the third quarter and 6% in the fourth quarter. Real GDP growth is projected at 17.2% for the first quarter of 2022-23 and 7.8% for the second quarter of 2022-23.

For FY22, the central bank projected CPI inflation to 5.1% in Q3 at 5.3% and 5.7% in Q4 with broadly balanced risks.

The central bank marked consistent consumer price inflation (CPI) since June 2020 without food and fuel as an “area of ​​policy concern” given input cost pressures that could be transmitted sharply to retail inflation as demand gets stronger.

“Price stability remains the cardinal principle of RBI as it fosters growth, stability, Governor Das added.

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