Takeaways from the RBI Monetary Policy meeting
In its first policy meeting after the Union Budget
2022, the Monetary Policy Committee (MPC) kept the key interest rates constant
on February 10 and maintained an accommodative stance. The MPC, led by RBI
Governor Shaktikanta Das, has kept the status quo for the tenth time in a row.
The following are the important takeaways from the
speech of Reserve Bank of India Governor Shaktikanta Das:
Both the repo rate and the reverse repo rate have been
fixed at 4% and 3.35 percent, respectively, by the MPC. In addition, despite
the elevated level of inflation, the panel maintained its so-called
The MPC voted unanimously to keep the current interest
rate and accommodative policy in place for as long as it is needed to keep
growth and inflation within the target range.
GDP growth is expected to be 7.8% in FY23, according
to the RBI. The central bank kept its growth forecast for the current fiscal
year at 9.2%.
The 5.3 percent CPI inflation projection for FY22 has
been maintained. In the second half of FY23, it is forecast to moderate closer
to the 4.00 percent objective, allowing monetary policy to remain
In December, retail inflation reached a five-month
high of 5.59 percent, up from 4.91 percent in November, owing primarily to an
increase in food costs. The MPC has been given the task of keeping annual
inflation at 4% through March 31, 2026, with a maximum tolerance of 6% and a
minimum tolerance of 2%.
Due to Omicron, there has been some lethargy in
economic activity. Given the outlook for inflation and growth, as well as the
uncertainties surrounding global spillovers and Omicron, the economy need
continuing policy assistance.
In the face of global spillovers, the rupee has proven
to be resilient. The current account deficit (CAD) is expected to be less than
2% of GDP in FY22. The RBI is dedicated to ensuring that the government borrowing
plan runs smoothly.
It is proposed that the cap on e-vouchers be raised
from Rs 10,000 to Rs 1 lakh.
Variable rate repo operations of various tenors will
be done as needed in the future. Second, the major liquidity management
instruments will be 14-day tenor variable rate repos and variable rate reverse
repos. Third, fine turning operations will enhance these operations. Fourth, with
effect from from March 1, the fixed rate reverse repo and Marginal
Standing Facility will only be available between 5:30 p.m. and 11:59 p.m. on