RBI MPC Meeting: Reserve Bank kept the repo rate stable, called inflation the main challenge for the economy.

RBI MPC Meeting: Reserve Bank kept the repo rate stable, called inflation the main challenge for the economy.

Keeping in mind inflation, economy and global conditions, the Reserve Bank has once again decided to keep the interest rates stable. After the important three-day meeting of the MPC, the Governor of the Reserve Bank said on Friday that it has been decided to maintain the main policy rate repo rate at 6.50 percent. In this way, the trend of keeping the repo rate stable for the last eight months is continuing this time too.

RBI Governor said that inflation still remains a challenge for the economy. 

< h3>Inflation had forced RBI

After the Corona epidemic, the Reserve Bank had continuously reduced the repo rate to support economic growth. At that time the main policy interest rate was reduced to 4 percent. The repo rate remained at 4 percent for a long time. However, later the Reserve Bank was forced to increase the repo rate after inflation went out of control and all the central banks including the US Central Bank Federal Reserve increased the interest rates.

Starting from May 2022. This increase was started by the Reserve Bank in May last year. Then in May 2022, there was a need for the Central Bank to call an emergency meeting of the MPC. In that meeting, the Reserve Bank had increased the repo rate in one stroke by 40 basis points i.e. 0.40 percent. After that the repo rate was increased in 5 consecutive meetings. This process of increasing the repo rate continued till February 2023. The Reserve Bank increased the repo rate by 2.50 percent from May 2022 to February 2023.

This is the main policy interest rate now

The Monetary Policy Committee of the Reserve Bank will decide on the interest rates. A meeting is held every two months to decide. This is the fourth meeting of the current financial year. This meeting, which lasted for three days, started on Wednesday, October 4. Earlier, in the MPC meeting held in the months of April, June and August, the Reserve Bank had also decided to keep the interest rates stable. Actually the rate has not been increased since February 2023. Currently the repo rate of the Reserve Bank is 6.5 percent.

RBI’s wait and watch strategy

Now the pressure is increasing on the Reserve Bank to reduce the repo rate, so that the growth can be boosted. Can get support. However, the trend of inflation is still not certain. Other global central banks have also not started reducing interest rates yet.

Connection of growth and inflation from repo rate

Reducing the repo rate will help in reducing the interest rates on home loans, personal loans and All types of loans including car loans become cheaper. This encourages people to take loans and consume, which increases demand in the economy and ultimately accelerates the economic growth rate. However, there is also a danger of increase in inflation. To control inflation, RBI controls the demand and liquidity by taking the help of repo rate. It is believed that the period of increase in repo rates has reached its peak. This means that now either the interest rates may remain stable for some time or the phase of decline may return soon.

Also read: Good start for the market before the announcement on repo rate, focus will be on banking-finance shares.

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