Marginal Standing Facility (MSF) rate and bank rate remain unchanged at 4.25%, reverse repo rate at 3.35%
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) voted unanimously to maintain the status quo with respect to the policy repo rate based on an assessment of the macroeconomic situation and outlook, and a 5 to 1 majority voted for a liberal policy stance. decided to retain.
“Consequently, the policy repo rate remains unchanged at 4%, and for as long as it is ensured that inflation remains, to revive and sustain growth on a sustainable basis and mitigate the impact of COVID-19 on the economy. necessary to continue doing so. Within the target going forward,” RBI Governor Shaktikanta Das said in his statement after the meeting.
The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%. The reverse repo rate also remains unchanged at 3.35%.
On MPC’s justification for maintaining status quo on policy rate and stance, he said, “Recovery of aggregate demand rests on private investment, which is still lagging behind. The MPC considered the accentuation of adversities arising from global growth as the main risk to the domestic outlook, which has now been somewhat tarnished by the Omicron version of COVID-19.
“Moreover, given the slowdown in the economy and the ongoing hold-up of activity, especially private consumption, which is still below its pre-pandemic levels, a sustainable and broad-based recovery requires continued policy support. Is. Against this background, the MPC decided to retain the existing repo rate at 4 per cent and continue with the accommodative stance,” he said.
Stating that the economic recovery that had been disrupted by the second wave of the pandemic was gaining traction but was not yet strong enough to be self-sustaining and sustainable, he said the downside risks of the outlook increased with the emergence of Omicron. and a renewed surge of COVID-19 infections in many countries.
“Furthermore, despite some recent corrections, the potential volatility in global financial markets due to rising international energy and commodity prices, the rapid normalization of monetary policy in advanced economies, and prolonged global supply constraints,” Das said. facing adversity.”
Taking all these factors into account, real GDP growth is projected at 9.5% FY22 which includes 6.6% in Q3 and 6.0% in Q4 of FY22. Real GDP growth is projected at 17.2% for Q1:FY23 and 7.8% for Q2:FY23.
Emphasizing that cost pressures continue to weigh on core inflation, though their pass-through may remain muted due to the slowdown in the economy, Mr Das said that for the rest of the year, the inflation print is likely to be somewhat higher. because the base effect changes. Adverse; However, it is expected that headline inflation will peak in Q4: 2021-22 and moderate thereafter.
Taking all these factors into account, the CPI inflation for FY 2012 is estimated at 5.3%; 5.1% in Q3; 5.7% in Q4 of 2021-22 with broadly balanced risks.
CPI inflation is then expected to moderate to 5% in Q1:FY23 and remain at 5% in Q2:FY23.
“Our monetary policy stance is primarily in line with growth in domestic inflation. In the current situation, it is important to target inflation with a focus on a strong growth recovery,” Mr. Das said.
Highlighting that the presence of the Omicron variant has added to the complexity of the situation, even as many economies are still battling the virus while others are reeling from the lingering mark of COVID-19 Continuing to tackle, Mr Das said, “Now, with further fears about restrictions on travel and activity, there is considerable uncertainty at this juncture as to how the growth-inflation dynamics will pan out in the immediate months. ,
As a result of this, the financial conditions are becoming increasingly unstable, he said.
surplus liquidity
He said the RBI has maintained sufficient surplus liquidity in the banking system to nurture the nascent growth impulses and support a sustainable economic recovery.
“This has facilitated faster and more complete monetary policy transmission and orderly operation of the government’s market borrowing programme. The Reserve Bank will continue to manage liquidity in a manner that is conducive to consolidating the recovery and promoting macroeconomic and financial stability,” he said.
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