Mumbai/IBNS-CMEDIA: The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 5.25% in its latest monetary policy announcement, according to media reports.
The decision was taken during the 60th meeting of the Monetary Policy Committee (MPC), held from April 6 to April 8.
After assessing evolving macroeconomic and financial conditions, the MPC unanimously voted to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25%.
Accordingly, the standing deposit facility (SDF) rate remains at 5.00%, while the marginal standing facility (MSF) rate and the Bank Rate continue at 5.50%. The MPC also decided to retain its neutral stance.
The announcement came hours after a two-week US-Iran ceasefire was declared.
Rationale behind the decision
- Headline inflation remains contained and below the target. However, upside risk increased.
- Continuation of strong momentum in economic activity. Growth impulses continue to be supported by robust private consumption and investment demand. However, the West Asia conflict is likely to impede growth.
- Higher input costs associated with increase in energy prices and international freight and insurance costs along with supply-chain disruptions that would constrain availability of key inputs for downstream sectors, would impair growth.
- The MPC opined that the intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks. However, the fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past.
‘Prudent to wait and watch’
Sanjay Malhotra said the decision to hold the repo rate steady reflects caution amid global volatility.
“The economy is confronted with a supply shock. It is prudent to wait and watch the evolving growth-inflation outlook,” he said.
“Accordingly, the MPC voted to keep the policy rate unchanged while remaining vigilant and closely monitoring incoming data,” Malhotra added.
He further said the neutral stance will allow the central bank to respond flexibly to changing economic conditions.
