Team News Riveting
New Delhi, August 10
The monetary policy committee (MPC) of Reserve Bank of India (RBI) on Thursday decided with majority to keep policy rate unchanged for third time in a row as it maintains heightened vigil on inflation.
Repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Central Bank of our country i.e. Reserve Bank of India (RBI) to maintain liquidity, in case of shortage of funds or due to some statutory measures. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
RBI Governor Shaktikanta Das said that the rate hike pause had been done with “preparedness to act if situation so warrants”. This is the third time the RBI MPC has decided to press the pause button on the repo rate hikes. Das added that the MPC, with a majority of 5-1, has decided to continue with the withdrawal of accommodation.
He said that the upcoming festival season was expected to provide support to private consumption and investment activities. Das added that the FMCG sales pick-up in rural areas reflects an “incipient revival” of rural demand. It is expected to get a further boost with a good Kharif harvest. However, the global economy continues to face daunting challenges of inflation, geopolitical uncertainty and extreme weather conditions.
The RBI Governor also announced a revised retail inflation projection for FY24 at 5.4 per cent from 5.1 per cent earlier. In the second quarter, the consumer price inflation-based (CPI) inflation is expected to be 6.2 per cent, followed by 5.7 per cent in Q3 and 5.2 per cent in Q4.
He attributed higher inflation to a spike in tomato prices and a rise in cereal pulses. “MPC will remain watchful of inflation and remains resolute to its commitment to align inflation to the targeted level of 4 per cent,” he said.
