RBI keeps repo rate unchanged, maintains 'accommodative' stance

The Reserve Bank of India's six-member monetary policy committee on Friday unanimously decided to keep the repo rate unchanged at 4%. The MPC also maintained a status quo on the reverse repo rate.

This is the eleventh straight meeting where the key policy rates have been left unchanged.

The monetary policy committee also retained its "accommodative" stance while focusing on "withdrawal of accommodation" to ensure that inflation remains within the target going forward.

"Since the RBI's last monetary policy meet, the positive effects of the ebbing of Omicron wave have been offset by geopolitical tensions," RBI governor Shaktikanta Das said, adding that concerns over protracted supply disruptions have rattled commodity and financial markets, given the significant share of the two economies engaged in war in global production and exports of key commodities like oil and natural gas, wheat, corn, palladium, aluminium, nickel, edible oils, and fertilisers.

"Global crude oil prices briefly crossed $130 per barrel, touching their highest level since 2008 and remain volatile at elevated levels, despite some correction. Global food prices along with metal and other commodity prices have also hardened significantly," he added. "Risk aversion towards assets of emerging market economies (EMEs) has increased, leading to large capital outflows and a depreciating bias in their currencies."

These developments, according to Das, have ratcheted up the projection of global inflation.

The central bank sharply increased its inflation projection to 5.7% in the financial year 2022-23 from its earlier forecast of 4.5%. This estimate is based on the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of US$ 100 per barrel.

The Reserve Bank of India also revised down India's gross domestic product (GDP) forecast to 7.2% for FY23 from 7.8% earlier. The real GDP growth is expected to rise to 16.2% in Q1 FY23; 6.2% in Q2 FY23; 4.1% in Q3 FY23 and 4% in Q4 FY23, the RBI governor said.

The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%. The standing deposit facility (SDF) rate, which will now be the floor of the LAF corridor, will be at 3.75%.

These decisions, according to MPC, are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.