RBI keeps repo rate unchanged

The Reserve Bank of India (RBI) on Friday kept its key lending rate unchanged for the third time in a row as widely expected amid high inflation and said it will maintain an accommodative stance, implying there could be more rate cuts in the future if need arises to support the economy hit by the coronavirus pandemic. The repo rate was left unchanged at 4% while the reverse repo rate or the key borrowing rate stayed at 3.35%.

RBI governor Shaktikanta Das said that the Monetary Policy Committee (MPC) voted unanimously to keep the repo rate unchanged at least till current financial year. He also said the economy was rebounding faster than expected from a coronavirus-pademic induced slump earlier in the year but warned signs of recovery were far from being broad based.RBI has slashed the repo rate by 115 basis points or bps since late March to cushion the shock from the coronavirus crisis and sweeping lockdowns to check its spread. However, inflation has remained consistently above the upper end of the RBI’s mandated 2%-6% target range every month barring March this year, with core inflation also remaining sticky.

Das said that the MPC expects this trend to persist and that the outlook for inflation has turned “adverse.” The MPC sees inflation in the current quarter at 6.8% before cooling slightly to 5.8% in the Jan-March quarter. Das also noted that consumer confidence for the next year has turned positive.