The Reserve Bank of India (RBI) monetary policy committee (MPC) on Thursday kept the repo rate unchanged at 6.50 percent for the sixth consecutive policy review. He maintained the political stance of “withdrawal from accommodation.”
RBI Governor Shaktikanta Das, in his policy announcement, said the MPC remains committed to aligning inflation with its target. “The MPC will closely monitor any signs that food price pressures spread to non-food items, as this could erode the progress made in reducing core inflation. Given the need to maintain the disinflationary trajectory, the MPC has chosen to maintain the policy repo rate at 6.50 percent for this meeting.
“It underlines the imperative for monetary policy to actively pursue disinflation to anchor inflation expectations and ensure effective transmission mechanisms. The MPC remains firm in its commitment to align inflation with the target. Furthermore, the MPC will continue to focus on gradually withdrawing accommodation to facilitate a progressive alignment of inflation with the target while supporting economic growth,” Das said.
Madhavi Arora, chief economist at Emkay Global Financial Services, said: “As expected, there was no change in the ‘de-accommodation’ stance. We understand that the RBI would be biased towards keeping overnight rates more in line with the repurchase rate than with the “Permanent Marginal Facility (MSF)/Permanent Depository Facility (SDF) in the future. “It is expected that some part of this alignment will be achieved naturally.”
“Our estimates suggest that the system’s liquidity shortfall is likely to narrow to 0.5-0.8 per cent of net demand and time liabilities (NDTL) in the coming months from 1.1-1, 2 percent of NDTL in January 2024, helped by government cash reduction. , Inter alia. Therefore, a change in stance may wait until April or even later, giving the RBI some leeway to understand and adapt to the fluid global dynamics,” he said.
First published: February 8, 2024 | 12:17 p.m. IS