The RBI has kept the repo rate at 4% for the seventh time in a row

RBI
RBI

The Reserve Bank of India (RBI) maintained its benchmark interest rates unchanged for the seventh consecutive day on Friday and maintained an accommodative stance, citing the need to support ongoing economic recovery in the face of continued uncertainty and global financial market volatility.

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According to RBI Governor Shaktikanta Das, the repo rate – the central bank’s lending rate – remains unchanged at 4% and the reverse repo rate – the central bank’s borrowing rate – remains unchanged at 3.35 percent for banks’ RBI-held deposits.

The Monetary Policy Committee (MPC), chaired by RBI Governor Shaktikanta Das, has maintained the status quo for the seventh consecutive meeting. RBI last revised its policy rate on May 22, 2020, during an off-policy cycle in order to stimulate demand by cutting interest rates to a record low.Das said the MPC voted unanimously to maintain the current rate and to maintain its accommodative stance for as long as necessary to support growth and keep inflation within the target range. The MPC has been mandated to keep annual inflation at 4% until March 31, 2026, with a maximum tolerance of 6% and a minimum tolerance of 2%.

Meanwhile, the RBI’s Monetary Policy Committee forecasts Gross Domestic Product (GDP) growth of 9.22% for FY 2021-22. Meanwhile, the RBI increased its forecast for CPI inflation to 5.7 percent in 2021-22. This equates to 5.9 percent in the second quarter, 5.3 percent in the third quarter, and 5.8 percent in the fourth quarter of 2021-22, with risks broadly balanced. CPI inflation is forecast to be 5.1 per cent in the first quarter of 2022-23.

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The second Covid wave increased economic uncertainty and pushed policy normalisation further into the future. While the economy is gradually reviving, economists believe the RBI does not want to derail growth by adjusting rates or stance.

Prior to raising rates during a period of visibly sticky inflation, economic growth must be sustainable. Since January, the price increase in global commodities, particularly those with a pass-through to the domestic market, has exerted significant downward pressure on both retail and wholesale inflation.

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