RBI’s decision to keep rates unchanged on expected lines: Experts
RBI left its key policy rates unchanged for a third straight meeting but signalled tighter policy if food prices drive inflation higher
Kolkata: The RBI’s decision to keep interest rates unchanged is on the expected lines as the Monetary Policy Committee remains focused on ensuring that inflation aligns with the target level, while supporting growth, experts said.
The Reserve Bank of India (RBI) left its key policy rates unchanged for a third straight meeting but signalled tighter policy if food prices drive inflation higher.
Also Read
The MPC, which has three members from the central bank and a similar number of external members, held the benchmark repurchase rate (repo) at 6.50 per cent in a unanimous decision.
In line with expectations, the MPC members have decided to keep the policy rate unchanged at 6.5 per cent, the standing deposit facility (SDF) at 6.25 per cent, MSF (marginal standing facility) and bank rate at 6.75 per cent, Bank of Baroda (BoB) Economics Research said.
The six-member MPC meet, which started on August 8, concluded on Thursday.
While SDF allows banks to deposit money with the RBI on an overnight basis, MSF is the rate at which banks can pledge government securities for gaining liquidity.
The BoB report said that RBI has also planned to continue with the stance of “withdrawal of accommodation” given the uncertainty in inflation outlook, and will act accordingly when the situation warrants.
The MPC remains committed to ensuring inflation within the target level, while supporting growth, the report said.
Today’s statement had a hawkish stance and no rate cuts are expected in the current financial year, it said.
Bandhan Bank Chief Economist Siddhartha Sanyal said the status quo on the policy rates by MPC and guidance on stronger vigil on inflation was expected.
“The MPC decision clearly comes across as a pragmatic one that avoids knee-jerk reaction to the current surge in retail inflation,” he said.
The apex bank has conveyed its preparedness to act if the situation demands in the coming months, he said.
“Inflation has surged of late but is largely confined to food inflation. Thus RBI refrained from any rate action at the moment and another hike in the coming months cannot be ruled out,” he added.
