New Delhi: The Reserve Bank of India (RBI) has decided to keep the policy repo rate unchanged at 5.25 per cent.
Announced today, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has maintained neutral policy stance.
"The re-escalation of the West Asia conflict since the first week of July has amplified volatility in energy prices and renewed uncertainty about supply chains. Amidst persistent global uncertainty, domestic economic activity has exhibited resilience as reflected by the high frequency indicators available for Q1," RBI Governor Sanjay Malhotra said.
The MPC has kept the Standing Deposit Facility (SDF) rate at 5 per cent. Meanwhile, the Marginal Standing Facility (MSF) rate and the bank rate are also kept constant at 5.5 per cent.
The regulator has revised its inflation estimates marginally lower by to 5% vs 5.1% earlier, with core inflation revised downwards to 4.3% vs 4.7% earlier. Concurrently, growth estimates have been revised marginally higher to 6.7% for FY27 vs 6.6% earlier.
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The Governor said, "Core inflation, excluding precious metals is projected to be lower than core, although it is likely to align with core inflation towards the end of the financial year."
On liquidity conditions, the Governor said, "Going ahead, the usual return of currency during the monsoon season, drawdown of government cash balances, and our special measures to attract capital inflows are expected to aid banking system liquidity in the near term."
He added, "Short-term money market rates, especially rates of commercial papers and certificates of deposit, moderated in July."
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According to the RBI Governor, The MPC made its decision in line with what markets were expecting.
The economists had anticipated that the six-member MPC would maintain the status quo on both interest rates and its neutral monetary policy stance.
Reacting to the decision, Dnyanada Vaidya, Research Analyst - BFSI, Axis Direct said, "The RBI’s decision to maintain the repo rate while keeping its neutral stance was largely anticipated as inflationary pressures eased slightly and growth remained resilient. While oil prices have corrected, monsoon-related challenges remain a key risk for the inflation and are keenly eyed."
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