New Delhi, Aug 6 (UNI) The Reserve Bank of India’s six-member Monetary Policy Committee (MPC) has decided to keep the policy repo rate unchanged at 5.50 per cent following its three-day meeting held on August 4,5, and 6. By keeping the repo rate unchanged, the central bank showed its continued focus on maintaining a balance between growth and inflation.
The Monetary Policy Committee also decided to continue with a ‘neutral’ stance. It means that the central bank will neither go for increasing money supply in the economy, nor for reducing it.
RBI said, “After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.50 per cent, consequently the standing deposit facility (SDF) rate shall remain unchanged at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate remains at 5.75 per cent.”
The Monetary Policy Committee also observed a sharp fall in headline inflation, but core inflation remains steady around the 4 per cent mark. The committee stressed an expected inflation surge in the last quarter of the fiscal year as base effects fade and demand-side pressure emerges.
MPC highlighted the uncertainties of the current global economic scenario and pointed towards the easing of financial market volatility and geopolitical uncertainties. The committee also signals towards the hurdles of trade negotiations.
Sanjay Malhotra, RBI Governor, said, “ As for the growth outlook, the above northwest monsoon, lower inflation, rising capacity utilization, and congenial financial conditions continue to support domestic economic activity.”
Malhotra also stressed that supportive monetary, regulatory, and fiscal policies with robust government capital expenditure will drive future economic demand.
On the external front, RBI noted, “Prospects of external demand, however, remain uncertain amidst ongoing tariff announcements and trade negotiations. The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose a risk to the growth outlook.”
RBI noted a current healthy banking system as Scheduled Commercial Banks (SCBs) performed well on multiple fronts, including capital adequacy, asset quality, and profitable metrics. Moreover, the Non-Banking Financial Companies (NBFCs) also maintained sound financial indicators, including the improvement in gross non-performing asset ratios.
“An Internal Working Group has reviewed the Reserve Bank’s extant Liquidity Management Framework (LDF), operative since February 2020. The group has submitted its report, and the same will be placed on the RBI website shortly for public consultation.” The Central Bank noted.
MPC reaffirmed its neutral stance and emphasized the need to remain watchful of the current trends on inflation and growth, urging for an economic readiness.
RBI holds Repo Rate at 5.5 pc, takes neutral stance on growth and inflation dynamics
