MPC voted unanimously to leave the repo rate unchanged at 4 percent. MPC also voted unanimously to keep stance accommodative. Reverse repo rate hiked by 40 bps to 3.75 percent to ensure liquidity. RBI to restore liquidity adjustment facility (LAF) corridor to 50 bps, as it was pre-Covid. Further, CPI inflation seen averaging 5.7 percent in FY23
AMN \ WEB DESK
Reserve Bank of India (RBI) today kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance despite rising inflation.
This is the 11th time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained the status quo. RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020 in an off-policy cycle to perk up demand by cutting the interest rate to a historic low.
MPC has decided to keep benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review.
Consequently, the reverse repo rate will continue to earn 3.35 per cent interest for banks for their deposits kept with RBI.
FY23 GDP growth forecast lowered to 7.2 percent from 7.8 percent
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) estimated that the GDP growth rate for Financial Year 2022-23 would be at 7.2 per cent.
RBI Governor Shaktikanta Das said FY23 GDP growth forecast lowered to 7.2 percent from 7.8 percent.
The projection of GDP growth for 2022-23 is seen at 16.2% in Q1 (Apr-Jun 2022), 6.2% in Q2 (Jul-Sept 2022), 4.1% in Q3 (Oct-Dec 2022), and 4% in Q4 (Jan-Mar 2023), assuming oil at $100 per barrel.
The MPC meeting, one of the most crucial policies of recent times, happened at a time when the global picture is highly occupied with the Russia-Ukraine geopolitical tensions, high fuel prices, crude oil price hikes in the global markets, commodity prices going through the roof, and rising inflation.
The ongoing war between Russia and Ukraine is posing a huge threat to global recovery. Geopolitical tensions in Russia and Ukraine have disrupted supply chains the world over. Due to high commodity and input prices, rising crude oil prices, rising inflation, and chip shortages, the overall growth rate has slowed. In addition, growth in the United States has also slowed. The increase in input prices has slowed spending and impacted consumer confidence.
MPC meets six times in a fiscal year
The six-member Monetary Policy Committee headed by the Reserve Bank of India Governor meets once every two months to review monetary policy. During the financial year, the Reserve Bank’s Monetary Policy Committee (MPC) meets six times. The rate-setting panel led by the Governor of the Reserve Bank of India (RBI) met for the first time this fiscal year from April 6 to 8.
After deliberating on the current domestic and economic developments, the MPC announces its bi-monthly monetary policy. The next MPC, according to the RBI’s calendar, will take place on June 6-8.