RBI keeps repo rate unchanged, lowers CPI inflation forecast

Reserve Bank of India (RBI) Governor Shaktikanta Das announced the October bi-monthly monetary policy statement on Friday, in which he said that the Monetary Policy Committee decided to keep the repo rate unchanged at 4% for the eighth meeting in a row. The MPC continues to maintain its "cumulative" stance. The reverse repo rate will also continue to gain 3.35% for banks on their deposits with the RBI.

The statement follows the three-day review meeting of the six-member Monetary Policy Committee chaired by Governor Das that began Wednesday. Most economists expected the Reserve Bank of India's monetary policy committee to keep its key interest rate unchanged.

The Reserve Bank of India has lowered its repo rate by a total of 115 basis points since March 2020 to cushion the blow from the Covid crisis. This comes after an interest rate cut of 135 basis points from the beginning of 2019.

Reserve Bank of India Monetary Policy Highlights:

• RBI has also proposed to introduce an offline retail digital payment framework across India.
• RBI has proposed introducing a framework to leverage geotagging technology across existing and new payment infrastructure.
• The Governor of the Reserve Bank of India (RBI) said: It has been decided to introduce an internal ombudsman system to handle complaints from large NBFC clients.
• The special 3-year LTRO of Rs 10,000 crore for SFB has been extended until December 31 and is available by clicking.
• RBI has increased the IMPS (Instant Payment Service) transaction limit to ₹5 lakh from ₹2 lakh.
• Variable Reverse Repo (VRR) auctions will scale every two weeks from ₹4 trillion to ₹6 trillion. RBI can supplement 14-day VRR auctions with 28-day VRR auctions. The governor announced that the liquidity absorbed in the first week of December in a fixed rate auction would be INR 2 to 3 trillion.
• "No need for more bond purchases: RBI stops buying G-SAP bonds, Governor Das said there is no need for more G-SAP. Furthermore, he added that RBI will remain on alert to conduct G-SAP if and when be necessary". The bank bought Rs 2.2 trillion through the Government Securities Acquisition Program (GSAP) in the previous two quarters.
• Food inflation is expected to remain quiet for the next month due to record food grain production, according to the governor of the Reserve Bank of India.
• Real GDP growth for the first quarter of fiscal 2022-23 is expected to be 17.2%
• The GDP forecasts include 7.9% in the second quarter, 6.8% in the third, and 6.1% in the fourth quarter (Q4).
• Reserve Bank of India (RBI) maintains a GDP growth target of 9.5% in fiscal year 22
• CPI inflation is estimated at 5.3% for this fiscal year from a previous estimate of 5.7%
• Consumer Price Index (CPI) from July to September lower than expected
• High-Frequency Indications That Economic Activity Is Gaining Momentum: Governor Das
• The course of inflation turned out to be more favorable than expected; Slowly recovering economic activity: Governor of the Reserve Bank of India
• Continue with the conciliatory stance to reactivate and sustain growth permanently: Governor Das
• The Monetary Policy Committee voted unanimously to keep the interest rate unchanged and decided to continue its accommodative stance for as long as necessary to support growth and keep inflation on target: Governor of the Reserve Bank of India, Shaktikanta das
• As expected, the Reserve Bank of India (RBI) keeps the repurchase rate unchanged at 4%, maintaining the harmonic stance.