Amid concerns over the Omicron variant of COVID-19 and high inflation, the Reserve Bank of India (RBI) on Wednesday decided to keep the policy rates unchanged. The RBI's six-member Monetary Policy Committee (MPC) met from Monday to Wednesday and the decision was announced today. The MPC had kept the benchmark policy rates unchanged in October as well.
Announcing the MPC's decision, RBI Governor Shaktikanta Das said, "MPC voted unanimously to maintain status quo with regard to the policy repo rate and by a majority of 5 to 1 to retain the accommodative policy stance. The policy repo rate remains unchanged at 4 per cent."
The central bank's repo rate currently stands at 4 per cent, while the reverse repo rate is at 3.35 per cent. The RBI also kept the forecast for India's GDP growth for financial year 2021-22 unchanged at 9.5 per cent.
The decision comes at a time when the US Federal Reserve is expected to speed up withdrawal of easy liquidity. A gradual withdrawal of liquidity in the US markets and the rise in interest rates in the near future would impact the fund flows into emerging markets like India. It could also impact the rupee value against the dollar and give rise to the threat of imported inflation.
Besides, interest rate hikes are expected globally as high inflation roils countries. India's consumer price index (CPI) inflation rose marginally to 4.48 per cent in October as compared to 4.35 per cent in September. The central bank has a target range of 4 (+-2 per cent) for CPI inflation.
Since the onset of the COVID-19 pandemic in March 2020, the RBI has moved to an expansionary monetary policy to support economic growth and provide liquidity in the system. After a contraction in the financial year 2020-21, the Indian economy grew by 8.4 per cent in July-September quarter of FY22.
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