RBI puts ‘temporary pause’ on repo rate cut; wants to see economic growth post Union Budget

RBI

The Reserve Bank of India’s Monetary Policy Committee has hit a pause on back-to-back repo rate cuts, in a bid to allow market interest rates stay in sync with the previous policy actions. The central bank is also waiting to observe how the upcoming Union Budget boosts economic growth.

RBI

“The forthcoming union budget will provide better insight into further measures to be undertaken by the Government and their impact on growth,” said RBI Monetary Policy Committee in its bi-monthly Monetary and Credit Policy Review today.

It is carefully monitoring the incoming data to collect clarity on the inflation outlook, said the statement further.

RBI MPC today kept the key policy rate, the repo rate unchanged at 5.15 percent, and surprised the street, which was at least expecting a 25 basis points cut, due to the rapidly falling GDP growth.

RBI said that its decision is in alignment with the objective of attaining the medium-term goal for CPI inflation and supporting growth, highlighting that inflation was a key matter of concern behind today’s repo rate action.

 “The MPC recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture,” said RBI Governor Shaktakanta Das.

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