RBI's move to keep key interest rates steady was expected, experts say

The RBI policy was on expected lines. They have prioritised growth over inflation, Ashish Shanker said

The Reserve Bank of India (RBI) kept key interest rates steady as widely expected on Friday amid persistently high inflation, and after a better-than-expected reading on economic growth.

The monetary policy committee also decided to retain an accommodative policy stance at least for the current financial year and into the next year to revive growth on a durable basis, Governor Shaktikanta Das said in an online briefing.

The key lending rate of the RBI or the repo rate was left unchanged at 4% while the reverse repo rate or the key borrowing rate stayed at 3.35%.

 

COMMENTARY

RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE

"Inflation and growth projections were dialled up - to capture the evolving firm inflation trajectory, CPI inflation was revised ~1.5% higher, besides a 2% upgrade in growth forecasts, expecting the headline to turn positive from the December quarter.

"These forecasts cement our expectations that the central bank MPC would prefer to settle into a long pause on rates, with a clear intention to anchor policy expectations.

"Bond market support would be maintained through open market operations as well as liquidity-neutral operation twists. Concurrently, to scale back additional liquidity boost from persistent FX intervention, we suspect the central bank might incrementally ease its bearish grip on the rupee in the coming weeks."

 

ASHISH SHANKER, DEPUTY MD AND HEAD OF INVESTMENT, MOTILAL OSWAL PRIVATE WEALTH MANAGEMENT, MUMBAI

"The RBI policy was on expected lines. They have prioritised growth over inflation. This is an acknowledgment that inflation drivers seem to be more supply-side led.

"An accommodative liquidity stance will ensure access to liquidity will not be a challenge and the ongoing recovery continues to gather steam. This will help push through government borrowings in a year when revenues are under pressure.

"Guidance is better than earlier on growth and flows."


(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


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