RBI keeps key interest rates unchanged for 11th consecutive time
The Reserve Bank of India on Friday kept the benchmark repo rate unchanged at 4% for the 11th time in a row. The decision was taken at the six-member Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das announced. However, the reverse repo rate was hiked from 3.35% to 3.50%. The MPC also voted unanimously to continue with an accommodative stance to support growth.
- This is the first bi-monthly policy for the current financial year 2022-23.
- Notably, the repo rate is the rate at which the central bank lends money to banks, while the reverse repo rate refers to the rate at which it borrows from commercial lenders.
- The apex bank has notably kept the repo rate low since May 2020 in view of the COVID-19 pandemic.
India's real GDP growth is projected at 7.2% for 2022-23, which has been downgraded from the 7.8% forecasted in the previous MPC meet. The RBI predicts 16.2% real GDP growth in Q1 of FY23, 6.2% in Q2, 4.1% in Q3, and 4% in Q4. The RBI further said the width of the liquidity adjustment facility would be restored to 50 basis points.
As for inflation, Governor Das said that the retail inflation for 2022-23 fiscal is projected at 5.7%, up from the 4.5% predicted in the February meeting. Coming to quarterly assessment, the inflation is seen at 6.3% for Q1FY23, 5% for Q2, 5.4% for Q3, and 5.1% for Q4. Notably, the government has mandated the RBI to keep inflation in the 2-6% range.
RBI Governor Das said the economic benefits from the improving COVID-19 situation in the country are offset by the escalation in geopolitical tensions. "Economy is confronted by new and humongous challenges. The situation in Europe (the Russian-Ukraine conflict) can derail the global economy," he said.
