The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept the key policy rate — Repo rate, or the RBI’s lending rate to banks — unchanged at four per cent for the seventh time in a row, and reverse repo rate — RBI’s borrowing rate from banks — at 3.35 per cent.
- The six-member MPC panel, voted in favour keeping key policy rates unchanged and decided to continue with an accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward.
- The nascent and hesitant recovery in the economy — which faced rough weather due to the Covid second wave and lockdowns in states — needs to be nurtured through fiscal, monetary and sectoral policy levers. Elevated inflation level and delayed recovery in the economy would have prompted the panel to keep rates steady.
- Interest rates in the banking system are expected to remain stable in the next couple of months.
- The RBI panel has hiked the inflation target for fiscal 2021-22 to 5.7 per cent from 5.1 per cent projected earlier.
- With crude oil prices at elevated levels, a calibrated reduction of the indirect tax component of pump prices by the Centre and states can help to substantially lessen cost pressures.
Source- Indian Express