BackRBI MPC keeps repo rate unchanged: '2021 setting up for a new growth era', says Das
The repo rate stood unchanged at 4%'Outlook on growth has improved significantly. MPC has judged that need for the hour is to continue supporting growth,' said Shaktikanta Das
PremiumThe six-member Monetary Policy Committee of the Reserve Bank of India, headed by Governor Shaktikanta Das, Friday decided to maintain status quo on policy rate. The repo rate stood unchanged at 4% as inflation has eased below “tolerance level of 6%", Das said. The reverse repo rate also stayed unchanged at 3.35%. The policy maintained accommodative stance. The MPC committee members voted unanimously in favour of the decision, Das added.
This was the first MPC meeting after the presentation of the Union Budget 2021-22. The central bank had last revised its policy rate on 22 May, 2020.
"Outlook on growth has improved significantly. MPC has judged that need for the hour is to continue supporting growth. Signs of recovery have strengthened further and list of normalising sectors is expanding," Das mentioned.
The RBI also upgraded its growth forecasts. The GDP growth pegged at 10.5% in 2021-22, said RBI Governor.
"It is our strong conviction, backed by forecasts, that in 2021/22, we would undo the damage that COVID-19 has inflicted on the economy," Governor said.
Das also said the retail inflation has "returned within the tolerance band" of 4%. The Reserve Bank has the mandate to keep retail inflation at 4 per cent with a bias of plus/minus 2% on either side.
The inflation (retail) projection is revised to 5.2% for Q4 of the current fiscal, Das said. The vegetable prices are likely to remain soft in near term on the back of fresh arrivals in the market, he further added.
For the first half of the next fiscal year, the Reserve Bank has projected inflation to be in a band of 5.2-5%.
Siddhartha Sanyal, Chief Economist and Head 0f Research, Bandhan Bank on the MPC announcement today.
"While the RBI maintained status quo on key policy rates, as expected, the central bank turned distinctly more comfortable on recovery in growth and softening in inflation prints despite uptick in global commodity prices such as metals and energy. The RBI clearly and rightly prefers continuing with their accommodative monetary policy stance as long as necessary to continue supporting the nascent recovery in growth," said Siddhartha Sanyal, chief economist and head of research, Bandhan Bank.
"The basis of the RBI policy remains accommodative, and it is reflected in the status quo with respect to the base rate - the repo rate is unchanged. But there is a strand of rationalization of excess liquidity, as is evident from the phased hike in the CRR for its restoration to 4 % , the pre-pandemic level," said Joseph Thomas, head of research - Emkay Wealth Management.
"Policy rates being unchanged is on the expected lines with inflation being within the range of 4% to 6%. Even in the next policy review, it is not expected to be changed since the inflation projection for first half of FY 22 is also within the range and more importantly the target is also expected to be retained at the current 4% with +_ 2%," said Divakar Vijayasarathy, founder and managing Partner, DVS Advisors LLP.
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