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The Central Bank leaves the repo rate unchanged;  Continue with an “accommodating” position

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to keep the repo rate unchanged at its first bi-monthly policy meeting in FY23, Governor Shaktikanta Das said on Friday. This is the 11th consecutive time that the central bank has maintained the status quo on the key rate.

Unchanged this time too, the repo rate currently stands at 4%. RBI raised reverse repo rate by 40 basis points to 3.75%

The central bank has decided to maintain an “accommodating” position, but emphasizing the withdrawal. In previous policies, the RBI had said the “accommodative” stance could continue for as long as needed to revive growth.

Over the past 10 meetings, the MPC had maintained an “accommodative” monetary policy.

The repo rate is the rate at which the central bank of the country lends funds to commercial banks. Commercial banks only borrow funds if they find that their funds are insufficient. A country’s monetary policy committee uses the reverse repo rate as a tool to control the money supply in the country.

The April policy is one of the most crucial policies of recent times amid the uncertainties caused by the Russian-Ukrainian conflict, the oil price spike that hit a 14-year high in early March and the sharp rise in inflation which has become a bigger concern than growth.

The announcement is in line with Street expectations as they largely expected a dovish central bank this time as well.

The MSF rate also remained unchanged at 4.25%.

The governor said the central bank started two years ago to grapple with the impact of COVD on the economy and had “successfully navigated through turbulent waters”.

“As the situation has normalized, we have taken steps to rebalance liquidity conditions,” Das said.

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First post: STI

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