RBI holds interest rates; projects GDP growth returning to positive territory in current quarter

Reserve Bank of India (RBI) on Friday left interest rates unchanged for the third straight time amid persistently high inflation and said the economy was recuperating fast and would return to positive growth in the current quarter itself. The six-member Monetary Policy Committee (MPC) unanimously decided to keep the benchmark repo rate — the rate at which RBI lends to commercial banks — at 4 per cent.

Since January, RBI has reduced that rate by 115 basis points before hitting the pause button in August on concerns on inflation. The reverse repo rate, or the rate at which banks lend to the central bank, was kept unchanged at 3.35 per cent. The MPC “decided to continue with the accommodative stance of monetary policy as long as necessary — at least through the current financial year and into the next year,” Governor Shaktikanta Das said.

The central bank’s stance is “to revive growth on a durable basis, and mitigate the impact of COVID-19 while ensuring that inflation remains within the target going forward,” he added. Das said inflation continues to be sticky. Consumer-price growth or the headline CPI inflation, at 7.6 per cent in October, was well above the upper end of the RBI’s 2-6 per cent target band and it expected the outlook for inflation to worsen. RBI sees price gains in the fiscal third quarter at 6.8 per cent and easing a bit to 5.8 per cent in January-March.