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Current Affairs 7th April, 2021: RBI Monetary Policy: Repo rate remains at 4%, and the central bank will maintain its accommodative stance as long as possible

7th April, 2021 Published by: Saloni Bhatia Updated Wed, 07 Apr 2021 08:20 PM IST
Source: Amar ujala
RBI Governor Shaktikanta Das announced Wednesday that the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) held the repo rate at 4% while retaining an "accommodative stance" as long as possible to alleviate the impact of the COVID-19 pandemic.

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The decision was made unanimously, according to the RBI governor, who also stated that the reverse repo rate would remain at 3.35 percent.
Despite an increase in COVID-19 cases in India, the Indian central bank was widely expected to maintain key interest rates. According to a recent Reuters poll, 65 of the 66 economists polled believe the MPC would maintain current interest rates.

The government had asked the RBI last week to keep retail inflation at 4% for another five years, ending in March 2026, with a 2% margin on either side.
The Reserve Bank of India has kept its policy rate unchanged for the fifth time in a row. Das said that the central bank would keep inflation at the target pace and that the recent increase in COVID-19 cases has raised concerns about the economy's recovery.

The priority, according to the RBI governor, should be on preventing the spread of coronavirus and promoting economic recovery. He went on to say that the RBI would make sure there was enough liquidity in the system so that the productive sector could get enough credit.

In terms of economic growth for the fiscal year 2021-22 (FY22), Das stated that the MPC kept the GDP forecast for FY22 at 10.5 percent unchanged. GDP growth is expected to be 26.2 percent in the first quarter (Q1FY22), 8.3 percent in the second quarter (Q2FY22), 5.4 percent in the third quarter (Q3FY22), and 6.2 percent in the fourth quarter (Q4FY22) (Q4FY22).

When it comes to inflation, The MPC revised consumer price index (CPI) inflation to 5% in the fourth quarter of the fiscal year 2020-21 (Q4FY21) and forecasted CPI inflation of 5.2 percent in the first half (Q1 and Q2) of FY22, 4.4 percent in the third quarter, and 5.1 percent in the fourth quarter.

Although headline inflation, at 5% in February, remaining within the tolerance band, he said that some subordinate constituents were approaching the upper tolerance range. The future trajectory of food inflation will be heavily influenced by the southwest monsoon's temporal and special progress in the 2021 season.

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