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Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) in its ninth meeting also decided to keep the repo rate at 6.50 percent as expected. In view of the high prices of food items, it has been decided to keep the repo rate intact. At the end of the three-day meeting, the inflation and economic growth rate forecast for the current financial year was also maintained. With interest rates remaining unchanged, there will be no immediate reduction in EMIs of various borrowers including home.
The repo rate remains at 6.50 per cent from April 2023. Four of the six members of the MPC voted in favour of keeping interest rates unchanged. The MPCA also maintained an accommodative return stance to bring down inflation to the target of four per cent. Inflation rose to 5.08 per cent in June due to high food prices.
A statement issued after the meeting said that high growth rate cannot be maintained without price stability and monetary policy should be pro-inflation.
RBI Governor Shaktikanta Das told reporters at the end of the three-day meeting, “Food inflation pressure cannot be ignored. Our goal is to bring down retail inflation. Consumerism has a 46 percent weight in retail inflation. Given the high share of food consumption, its high price cannot be ignored.”
Das said the MPC will need to be cautious to ensure that the gains from tight monetary policy are not wiped out by higher consumer inflation.
Inflation is coming down, but at a slow pace, so a strong approach to the four percent target will also be needed. Only then can it be believed that monetary policy has made the best contribution to supporting the country's economic growth.
The Reserve Bank has maintained its forecast of retail inflation at 4.50 per cent and economic growth rate at 7.20 per cent for the current financial year.
Increased agricultural activity in the country is expected to boost rural consumption while continued growth in the services sector will support urban consumption.
An analyst said that in the meantime, due to the repo rate remaining unchanged, there is no possibility of reduction in the rates of home, vehicle, personal and other loans, not only this, the borrowers will also have to wait for the reduction in EMI.
Main issues of monetary policy of Reserve Bank
* Repo rate was kept at 6.50 percent for the ninth consecutive time
* Focus will remain on bringing housing trends back to control inflation while supporting growth
* GDP for the current financial year is estimated at 7.20 percent while inflation is estimated at 4.50 percent.
* The limit for tax payment through UPI has been increased from Rs 1 lakh to Rs 5 lakh
* Cheque clearance time reduced from days to hours
*Announcement that foreign exchange reserves have risen to an all-time high of $675 billion
