The Reserve Bank of India’s Monetary Policy Committee (MPC) kept key interest rates unchanged for the tenth consecutive meeting on Thursday, maintaining an accommodative stance amid threats surrounding Omicron’s coronavirus variant.
Reserve Bank of India Governor Shaktikanta Das said in a statement after a three-day meeting of the Mumbai Committee that the repo and reverse repo rates remained unchanged at 4% and 3.35%, respectively.
“India is charting a different recovery path than the rest of the world to become the fastest growing economy,” Das said.
Das said the six-member rate committee, which has been suspended since August 2020, maintained its accommodative policy stance by a 5-1 vote, suggesting the economy needs continued support despite accelerating inflation. While maintaining his accommodative stance, he reiterated the “as long as necessary” phraseology used since October 2019.
“Monetary policy actions will be calibrated and clearly communicated,” Das said, stressing that there would be no surprises.
The central bank has cut repo rates by a total of 115 basis points (bps) since March 2020 to soften the blow from the coronavirus pandemic and draconian containment measures. That rate is now 250 basis points below where it was at the start of the easing cycle in early 2019.
The Reserve Bank of India lowered its inflation outlook for the next fiscal year to 4.5% from 5.3% this year. The central bank expects gross domestic product growth to slow to 7.8% in the next fiscal year, down from the government’s 9.2% estimate for this year.
“Given the comfort from the inflation and growth outlook, especially the improved inflation outlook, and the uncertainty associated with omicron and global spillovers, the MPC believes that continued policy support is necessary for a durable and broad recovery,” Das said, according to Bloomberg.
Respondents in the Feb. 2-4 Reuters poll were split on the timing of the next rise, with 17 of 32 respondents slightly more than half expecting a 25 basis point rise to 4.25% in April.
Of the remaining 15, 13 were nearly split between June and August. Only one economist said it would happen as early as the beginning of this month, while another said it would happen in October of this year.
