Reserve Bank of India (RBI) Governor Shaktikanta Das, after the Monetary Policy Committee announcements on Thursday, said during a media interaction that the decision to keep repo rates unchanged is only a “pause, not a pivot”. He had, during the announcements earlier in the day, also said that the central bank is ready to act if the situation warrants, indicating the possibility of further rate hikes in the future.
While emphasising that the decision to put a pause on the repo rate is for this meeting only, Governor Das said that the MPC “decided unanimously to keep the policy repo rate unchanged at 6.50 per cent in this meeting with readiness to act, should the situation so warrant”.
In the previous financial year, the Reserve Bank of India increased the repo rate six times, amounting to an increase of 250 bps to 6.5 per cent, which was kept unchanged at Thursday's policy meeting.
In the May 2022 policy, RBI increased the rate by 40 bps, followed by 50 bps in June, another 50 bps in August, 50 bps in September, 35 bps in September and 25 bps in February 2023 policy.
Governor Das said, “To recapitulate the actions taken so far, we have increased the policy repo rate cumulatively by 250 bps in the last 11 months starting May 2022. This was preceded by the introduction of the Standing Deposit Facility (SDF) at a rate 40 bps higher than the fixed rate reverse repo. Thus, the effective rate hike since April last year has been 290 bps.”
He said that it is now necessary to evaluate the cumulative impact of these rate hikes, and emphasised the need to be “extremely prudent in our actions”.
The RBI decided to remain focused on ‘withdrawal of accommodation’ in its stance as inflation is above target. “Overall, inflation is above the target and given its current level, the present policy rate can still be regarded as accommodative. Hence, the MPC decided to remain focused on withdrawal of accommodation,” he said.
Also read: RBI MPC Meet 2023: MPC unanimously votes to keep repo rate unchanged at 6.5%
Also read: RBI MPC announcement: Central bank keeps repo rate constant, other key takeaways