RBI Keeps Key Rates Unchanged: “As Long As Necessary To Revive Growth”

Oct 8, 2021

The central bank also retained an ‘accommodative’ monetary stance i.e. a willingness to either cut the rates or keep them steady, depending on the evolving situation.
The Reserve Bank last cut its policy rates on May 22, 2020, in an off-policy cycle when the covid-19 pandemic first shook the country. The central bank has slashed its key lending rate i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the aftershock of coronavirus.

RBI Governor Shaktikanta Das has retained real GDP growth projection at 9.5 per cent for FY2021-22, while highlighting that high-frequency Indicators show that economic activity has gained momentum in the second quarter. But he did caution that economic output is still below pre-covid levels.

Rating agency Moody’s had recently upgraded India’s rating outlook to “stable” from “negative.” The global rating agency said economic recovery is in progress as activity is gradually picking up and spreading across sectors.

On inflation, the RBI Governor Shaktikanta Das projected CPI inflation at 5.3 per cent for the current year and asserted the central bank will ensure inflation remains within the target range, which is 2-6 per cent.

Meanwhile, India’s services industry expanded for a second straight month in September, bolstered by improved domestic demand and easing Covid-19 restrictions, pushing companies to hire more employees for the first time in nearly a year.

The IHS Markit Services Purchasing Managers’ Index eased to 55.2 in September from August’s 18-month high of 56.7, but stayed comfortably above the 50-mark separating growth from contraction.