Monetary Policy Committee (MPC) Review: Policy Rate Unchanged; GDP Forecast Reduced To 6.6%
STORIES, ANALYSES, EXPERT VIEWS
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) Friday, with a majority of 4:2, decided to keep the repo rate (key lending rate) unchanged at 6.5% for the 11th consecutive meeting, citing concerns over inflation and the uncertain growth outlook.
The central bank chose to maintain its 'neutral' stance, which it had adopted in the October meeting, moving away from the earlier 'withdrawal of accommodation' stance.
RBI Governor Shaktikanta Das, while announcing the decision, noted that the RBI’s hawkish outlook on inflation was due to persistently high food inflation, which has yet to stabilise. Despite this, the central bank remains optimistic about India’s growth outlook, supported by good monsoon seasons and the anticipated revival of capital expenditure.
"MPC took note of cent slowdown in growth momentum which translates into downward revision in growth forecast for current year," said Das.
RBI counters pressure to ease borrowing costs: The decision to hold the rate comes amid pressure from both the government and economists to ease borrowing costs. Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal have expressed concerns about high borrowing costs, while some economists are calling for the RBI to take more action to encourage lending and boost growth. However, Governor Das ruled out any immediate rate cuts, with inflation still above the RBI's target of 4%.
