RBI keeps repo rate unchanged amid high inflation

The Reserve Bank of India (RBI) on Friday kept key repo rate unchanged at 4 per cent in view of rising inflation and faint signs of economic growth amid gradual lifting of coronavirus (COVID-19) countrywide lockdown.

The central bank’s newly-constituted monetary policy committee (MPC) began its three-day meeting on October 7 and maintained the stance as accommodative. It also kept the reverse repo rate unchanged at 3.35 per cent.

Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation.

While there are some signs of a pick up in activity due to the staggered easing of lockdown, there is a large degree of uncertainty amid surging virus cases.

“The MPC voted unanimously to leave the policy repo rate unchanged at 4 per cent and continue with the accommodative stance of monetary policy as long as necessary to revive growth, mitigate the impact of COVID-19 while ensuring that inflation remains within the target going forward,” said RBI Governor Shaktikanta Das.

The headline inflation is close to 6.7 per cent level amid supply disruptions, beyond the comfort level of the central bank. The RBI is tasked with keeping inflation at 4 per cent in the medium-term with a 2 percentage point leeway on either side.

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