RBI Monetary Policy Highlights: Unchanged repo rate
RBI to maintain ‘calibrated tightening’ stance; signals rate cut in future
The RBI on Wednesday not only kept repo rate constant but also maintained a ‘calibrated tightening’ stance. The market had expected a status quo from the policymakers, but the stance was a disappointment to many.
However, Governor Urjit Patel signalled the possibility of a rate cut in future. “..see space for commensurate policy action if inflation risks don’t materialise,” Patel said.
In the last MPC(Monetary Policy Committee), the RBI decided to not hike the repo rate. This took everyone by surprise as the market was bracing for it as an intervention as the Rupee was constantly falling.
RBI governor Urjit Patel defended the decision by saying that the central bank’s mandate is inflation targeting. He also said that the change in stance from ‘neutral’ to ‘calibrated tightening’ meant that the rate cut was off the table.
Repo rate is the rate at which RBI lends money to other banks in India; whenever there is a shortage of funds. Repo rate is used by monetary agencies to control inflation.