The Reserve Bank of India (RBI) on August 6 maintained the status quo on monetary policy, keeping the repo rate unchanged at 4 percent, in line with the expectations of economists.
The Monetary Policy Committee (MPC) said it will continue with the accommodative stance as long as necessary to support a struggling economy hit by the COVID-19 pandemic.
"The growing consensus is that the recovery is occurring on a diverging two-track mode. Countries that are ahead in vaccination and have been able to provide or maintain policy stimulus are rebounding strongly. Growth in other economies remains subdued and vulnerable to new waves of infections. There has been a slowing of momentum in global trade volumes in Q2:2021, with elevated shipping charges and logistics costs posing headwinds," the MPC said in its statement.
Also read: MPC keeps repo rate unchanged at 4%, GDP growth target retained at 9.5% in FY22
Here are highlights from the MPC's decision:
> The reverse repo rate is maintained at 3.35 percent, and the marginal standing facility (MSF) rate and the bank rate are at 4.25 percent.
> The MPC retained its real Gross Domestic Product (GDP) outlook of 9.5 percent for 2021-22.
"Firms polled in the Reserve Bank surveys expect expansion in production volumes and new orders in Q2:2021-22, which is likely to sustain through Q4. Elevated levels of global commodity prices and financial market volatility are, however, the main downside risks," the MPC said.
Also read: RBI Monetary policy: CPI inflation pegged at 5.7% for FY 2022
> The forecast for Consumer Price Index (CPI) inflation in FY22 is revised to 5.7 percent from the previous estimate of 5.1 percent.
CPI inflation is expected to be at 5.1 percent for Q1, 5.9 percent in Q2, 5.3 percent in Q3, and 5.8 percent in Q4 of FY22.
> RBI Governor Shaktikanta Das cautioned against the threat of a likely third wave of the pandemic and assured that the central bank will remain vigilant. "The need of the hour is not to drop out the guard and remain vigilant against any possibility of third-wave especially in the backdrop of rising infections in certain parts of the country," he said.
Also read: MPC maintains status quo, 10 rate-sensitive stocks to buy for medium to long term
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