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RBI keeps key policy rates unchanged, predicts 10.5% GDP growth

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In a bid to support India’s sharp recovery from the COVID-19 pandemic, the Reserve Bank of India (RBI) on Friday kept the key policy rates unchanged in its Monetary Policy Committee (MPC) review meeting.  Notably, MPC has kept the repo and reverse repo rate unchanged since the last three announcements.

Unanimous decision

While the central bank has kept the repo rate at 4 per cent, the reverse repo rate has been kept at 3.35 per cent. The announcement in this regard was made by RBI Governor Shaktikanta Das post the MPC review meeting in Mumbai.

Shaktikanta Das said that the MPC unanimously decided to keep the key rates unchanged and to keep it that way till necessary. RBI has also pegged the country’s growth rate at 10.5% in the financial year 2021-22.

RBI slashed rates to support economic recovery

RBI has slashed its key lending rate by 115 basis points since March 2020 to cushion the economy from the shock of the coronavirus crisis. The central bank had last cut its policy rate on May 22, 2020, in an off-policy cycle, when COVID-19 posed an unprecedented challenge to the Indian economy.

Also Read: 12,408 fresh COVID-19 cases, 49.59 lakh people vaccinated so far

Since then, the banking regulator has maintained the status quo on repo rates—the key interest rate at which the RBI lends money to commercial banks—steady at a 19-year low of 4 per cent. The reverse repo rate—the rate at which the RBI borrows from banks—is at 3.35 per cent.

Retail inflation declines

Retail inflation fell sharply to 4.59 per cent in December 2020, the latest data shows. Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in November. Inflation in the food basket plunged sharply to 3.41 per cent in December from 9.50 per cent in November on the back of 10.41 per cent deflation in vegetable prices.

Notably, the International Monetary Fund, in its latest report, has predicted that the Indian economy is likely to grow at a rate of over 11 per cent in 2021.

 

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