Pause, not pivot, says RBI governor as repo rate stays unchanged at 6.5%
The Hindu
In a surprise move on Thursday, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously decided to keep the repo rate unchanged at 6.50% and to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
In a surprise move on Thursday, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously decided to keep the repo rate unchanged at 6.50% and to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
Interest rates have been rising continuously since last April until this pause to stem inflation. The RBI said that the MPC would remain watchful and would not hesitate to take further action as may be required in its future meetings.
Addressing a press conference after making his statement on the monetary policy, RBI governor Shaktikanta Das said, “It’s a pause and not a pivot.”
“Our job is not yet finished and the war against inflation has to continue until we see durable decline in inflation closer to the target. We stand ready to act appropriately and in time,” he added.
Stating that there has been an effective rate increase of 290 basis points (bps) over the last year, including the SDF of 40 bps already increased, he said this 290 bps increase in fact has translated to a monetary policy transmission by way of increase of over night call rate from the daily average in March last year to the daily average of March this year by 320 bps.
“In last March, the rate was 3.32% and this March, the daily average is 6.52%. So therefore the effective increase is in the order of 320 bps. It is therefore now necessary to access the cumulative impact of our action taken so far,” he said.
Given the overall microeconomic and financial stability, “our priority continues to be price stability”, the RBI governor said.
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