RBI keeps key policy rate unchanged; cuts growth forecast to 9.5%

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday announced it would maintain the status quo on its key rates. RBI governor Shaktikanta Das said that it was decided to keep the repo rate and the reverse repo rate unchanged at 4 per cent and 3.35 per cent respectively to mitigate the impact of Covid-19 on the economy.

“Enduring lesson from Covid-19 experience in the Indian context has been the deployment of unconventional monetary policy measures that distribute liquidity among all stakeholders,” Das said.

Das said that the policy committee has decided to maintain the accommodative stance to continue as long as necessary to revive and sustain growth and ensure that inflation remains within the range.

“The MPC voted to maintain status quo—repo rate remains unchanged at 4%. MCC also decided to continue with accommodative stance as long as necessary to revive and sustain growth on durable basis and to mitigate impact of Covid on economy,” Das said in Mumbai after the MPC’s three-day meeting.

“The MPC was of the view that at this juncture policy support from all sides is required to gain the momentum of growth that was evident in the second half of 2021 and to nurture the recovery after it has taken root,” Das said.

RBI also held the reverse repo rate, the borrowing rate, unchanged at 3.35 per cent, Das added. The central bank also lowered its estimate for economic growth to 9.5 per cent for the current fiscal from earlier projection of 10.5 per cent due to the impact of the second wave of the Covid-19 pandemic. The Marginal Standing Facility (MSF) rate and bank rates were also kept unchanged at 4.25 per cent, he added.

MPC, which is the RBI’s rate-setting panel, began its three-day deliberations on the monetary policy on June 1.

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