RBI Policy | MPC keeps repo rate unchanged at 4%, retains accommodative stance

RBI Governor Shaktikanta Das: Fighting inflation

The Monetary Policy Committee (MPC) of the Reserve Bank of India retained the key policy rate, repo, at 4 percent on April 8.

Repo is the rate at which the central bank lends short-term funds to banks. The MPC also retained the policy stance as ‘accommodative’ indicating that the rate-setting body is focused on boosting the economic growth.

The reverse repo, or the rate at which the central bank borrows short-term funds from banks, has been kept unchanged at 3.35 percent.

The RBI has cut the repo rate by 250 basis points since February 2019 to help revive the growth momentum. One basis point is one hundredth of a percentage point. An accommodative stance indicates that the MPC is in readiness to cut rates or keep the rates on hold till the time the growth signals are recovering.

India’s consumer price index (CPI) inflation rose to 6.07 percent in February 2022 from 6.01 in January 2022, data released on March 14 showed. It was 5.03 percent in February 2021. The MPC has the mandate to keep the inflation within the 2-6 percent range.

The CPI inflation print for February is above the consensus estimate. According to a Reuters poll, economists expected the retail inflation to slip to 5.93 percent. The RBI said in February that the CPI inflation would average 5.7 percent in the first quarter of 2022.

Growth recovery remains sluggish, though the momentum has picked up compared with the peak of COVID crisis. In the February RBI policy, Jayanth Varma, one of the MPC members, pitched against the continuation of the so-called accommodative stance, saying the rate-setting panel's continued focus on the pandemic fight had become counterproductive.