Reserve Bank of India Governor Shaktikanta Das on Wednesday announced that the key interest rates will remain unchanged and the accommodative policy stance will continue as long as necessary to mitigate the impact of Covid-19 pandemic.
The six-member Monetary Policy Committee kept the repo rate unchanged at 4 percent and reverse repo rate at 3.35 percent for the fifth time in a row since May.
The central bank Governor said the MPC voted unanimously for the accommodative policy stance and interests rates to maintain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy while ensuring that inflation remains within the target going forward.
The recent surge in infections has imparted greater uncertainty to the outlook. It needs to be closely watched especially as localised lockdowns could dampen the improvements in the demand conditions and delay the return of normalcy, said the Governor.
At its 3-day review meeting, the MPC has noted that the economic activities are normalising, rural demands remain buoyant, urban demand has gained traction. The committee also expressed concerns over the fresh surge in the number of Covid-19 infections but hopes the vaccination drive will give a fillip to the growth. Taking into consideration all these factors, the MPC has kept the Gross Domestic Product (GDP) growth forecast unchanged at 10.5 percent for FY22, according to the central bank.
In order to support the debt markets, the central bank has announced a new secondary market bond purchase of Rs 1 lakh crore in Q1. As part of the programme, the RBI will commit to purchase a definite amount of government securities to sustain congenial financing conditions, said Das.
The MPC has projected the CPI inflation at 5 percent in Q4FY2, 5.2 percent in Q1FY22, 5.2 percent in Q2, 4.4 percent in Q3 and 5.1 percent in Q4, noting that the supply-side pressures on inflation could persist even as demand-side pull remains moderate.
Meanwhile, the central bank has last cut its policy rates on May 22, 2020 during the first wave of dreaded Covid-19 pandemic. Since March 2020, it has slashed its repo rate by 115 basis points to support the economy amid the coronavirus crisis.