The Reserve Bank of India (RBI) on Friday kept the repo rate unchanged at 4 per cent. The reverse repo rate also remained the same at 3.35 per cent. This was the first monetary policy announcement in the new financial year that commenced on April 1.
GDP GROWTH, INFLATION
The central bank has lowered its gross domestic product (GDP) rate projection to 7.2 per cent for the ongoing financial year of 2022-23 from an earlier estimate of 7.8 per cent, announced in February.
However, the central bank noted that the country’s economy was recovering.
The RBI has projected that inflation will be higher than that of February.
The inflation forecast for the fiscal 2022-23 has been increased to 5.7 per cent against the previous estimate of 4.5 per cent.
The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, held its first meeting in the current financial year from April 6 to today. The decision to keep the key interest rates unchanged was taken unanimously.
RBI has also rephrased its ‘accommodative’ stance to focus on withdrawal of accommodation.
The interest rate or repo rate is the rate that the RBI charges when commercial banks borrow money from the country’s central bank. The reverse repo rate is that charge that the RBI pays to commercial banks. Both are considered as benchmark interest rates in the country’s economy.
In the last 10 meetings, the MPC left interest rate unchanged and also maintained an accommodative monetary policy stance.
The repo rate, or the short-term lending rate, was last cut on May 22, 2020. Since then, the rate remains at a historic low of 4 per cent.
The ongoing Russia-Ukraine conflict and surging oil prices are pushing the cost of commodities higher, resulting in rising inflationary trends.
Earlier, the government had mandated the central bank to keep inflation at 4 per cent, with an upper and lower tolerance level of 2 per cent.
After the February MPC meeting, the RBI had decided to hold its key lending rates steady at record low levels for the 10th straight meeting to support a durable recovery of the economy.