Lagatar24 Desk
New Delhi, August 10: Shaktikanta Das, Governor of the Reserve Bank of India, announced on Thursday that the MPC had opted to maintain the key repo rate unchanged at 6.50 percent, as expected by economists.
The six-member MPC opted to maintain the key rates unchanged for the third time in a row.
“After detailed deliberations on all relevant aspects, the MPC decided unanimously to keep the policy repo rate unchanged at 6.50 per cent,” Das said.
As a result, the bank rate and the Marginal Standing Facility (MSF) rate are both at 6.75 percent, while the Standing Deposit Facility (SDF) rate stays at 6.25 percent.
In order to guarantee that inflation “progressively aligns with the target” while fostering growth, the MPC also determined by a vote of 5 out of 6 members to continue focusing on the withdrawal of accommodation, Governor Das said.
Governor Das, however, voiced worry over the recent spike in inflation and noted that it has led the central bank to keep a hawkish position.
Governor Das gave an explanation of the MPC’s reasoning for its decision, stating that, “Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July and August, led by vegetable prices.”
While the shock in vegetable prices may soon subside, Governor Das warned that given the lopsided southwest monsoon to date, potential El Nino weather conditions as well as world food prices need to be properly monitored.
He said: “These developments warrant heightened vigilance on the evolving inflation trajectory. The cumulative rate hike of 250 basis points undertaken by the MPC so far is working its way to the economy.”
The RBI governor noted that despite weak foreign demand, domestic economic activity is holding up well and is likely to keep growing.
He said, “Considering this confluence of factors, the MPC decided to remain watchful and evaluate the emerging situation.” The MPC would be prepared to take action “should the situation warrant,” according to Governor Das’ speech.
He continued by stating that the MPC is “resolute in its commitment” to bringing inflation to the 4% objective and stabilising inflation expectations.
