Monday 18 October 2021
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HomeEconomyRBI keeps interest rates unchanged for 7th time in a row

RBI keeps interest rates unchanged for 7th time in a row

The RBI governor said that economic activity would pick up on vaccination and that more needed to be done to restore supply-demand balance in the economy

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The Reserve Bank of India (RBI) on 6 August kept interest rates unchanged at 4%. Announcing the bi-monthly monetary policy, Governor Shaktikanta Das said that the action is aimed at prioritising growth and addressing distress in economy.

The RBI governor said that economic activity would pick up on vaccination and that more needed to be done to restore supply- balance in the economy. He said that inflationary pressure is transitory.

Notably, the benchmark CPI inflation in India has remained above 6% over the months of May and June and is likely to remain sticky in the near future. On the other hand, a strong kharif crop output led by a favourable monsoon and the easing of supply bottlenecks from a tapering down of the may partly cool down the inflationary pressures from Q3FY22.

Meanwhile, the Monetary Policy Committee (MPC), which decides on key interest rates, will meet six times during the next financial year, the RBI has said. Half of the committee, which is headed by RBI Governor Shaktikanta Das, is made up of external independent members.

While the first two meetings of the six-member MPC took place in April and June, the remaining will take place in August (third); October 6 to 8 (fourth); 6 to 8 December (fifth) and 7 to 9 February 2022 (sixth).

The government moved the interest rate-setting role from the RBI governor to the six-member MPC in 2016. As per the Reserve Bank of India Act, 1934, the central bank is required to organise at least four meetings of the MPC in a year.

The RBI governor said that inflation was gradually coming under control even as fuel prices remained at a record high. He said the improving economic activity with the ebbing of the second wave, and consumption, investment and external have been gaining as a result.

Das said that the financial markets have benefitted due to improvement in economic activity.

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