RBI keeps key repo rate unchanged at 4%

The Reserve Bank of India (RBI) on Friday kept the repo rate unchanged for the seventh time in a row at 4 per cent, citing the need to support the ongoing growth recovery amid continued uncertainty and global financial market volatility.

"RBI keeps interest rates unchanged at 4 per cent and will continue with the accommodative stance as long as necessary," governor Shaktikanta Das said.

The Monetary Policy Committee (MPC) of RBI also kept the reverse repo rate unchanged at 3.3 per cent. The announcement came after a three-day meeting of its MPC.

RBI has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the health crisis and tough containment measures.

The second Covid-19 wave has raised uncertainty around economic outlook and pushed potential policy normalisation further into the future.

Das said that economic activity is normalising with the ebbing of the second wave of Covid-19. "The action is aimed at prioritising growth and addressing distress in the economy. Consumption, investment, external demand are on the path of regaining traction. More needs to be done to restore supply-demand balance in the economy, inflationary pressure transitory," he added.

While the economy is slowly coming back on track, economists say that the RBI does not want to derail the pace of growth by tweaking the rates or stance, reports news agency ANI.

Das further said that Consumer Price Index (CPI) inflation is seen at 5.7 per cent in 2020-21 and it will fall to 5.1 per cent in April-June 2022.