The Reserve Bank of India’s MPC kept key borrowing rates unchanged last week. The committee maintained an ‘accommodative stance to support economic growth.
With growth recovery, perhaps, RBI Governor Shaktikanta Das hopes credit growth will pick up and given the festive season, demand for cash also goes up.
The proposed rollback of exceptional measures instituted during the crisis, will be 'gradual, calibrated and non-disruptive,' and are being done in two levers.
RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
According to the minutes of the MPC meeting released on Friday, Das underlined the need for closely monitoring the price situation with a view to anchoring inflation expectations.
When RBI left the benchmark interest rate unchanged at 4 per cent at its June policy meet, it was the sixth time in a row that its monetary policy committee maintained status quo on interest rate.
The Reserve Bank of India will keep rates unchanged and continue to maintain an accommodative policy stance.
An expert said that growth concerns and weak demand conditions owing to impact of second wave of COVID on employment puts constraints on any change in stance by the MPC.
The key at the moment lies with our monetary masters, aka RBI, as price and financial stability are central to economic stability. The latter is unthinkable before we conquer the other two.
A few members have cautioned against rising global fuel prices and elevated inflation expectations.
According to him, the conducive external conditions are forming for a durable recovery beyond pre-pandemic levels.
The projection is well within the Monetary Policy Committee's target to keep the rate of inflation at 4 per cent with an upper or lower tolerance level of 2 per cent.
The central bank has projected real GDP growth at 9.5% which is down from 10.5% estimated earlier
The key lending rate, the repo rate, was kept at 4 per cent and the reverse repo rate or the central bank's borrowing rate at 3.35 per cent.
All six MPC members had unanimously voted to keep the rates unchanged at 4 per cent during its April meeting, amid rising uncertainty regarding the impact of the second wave on growth.