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The Reserve Bank of India (RBI) has announced its decision to maintain the policy rate unchanged for the fourth consecutive time, highlighting its commitment to closely monitoring inflation. This move comes after the rate increase cycle was put on hold in April, following six consecutive rate hikes totalling 250 basis points since May 2022.
RBI Governor Shaktikanta Das, while announcing the bi-monthly monetary policy, revealed that the Monetary Policy Committee (MPC) had reached a unanimous decision to keep the repo rate steady at 6.5 percent. This decision reflects the central bank's dedication to ensuring that inflation aligns with its targeted level.
In terms of economic growth, Governor Das disclosed that the growth projection for the current financial year remains unchanged at 6.5 percent, with risks being evenly balanced. This steadiness in growth forecasts indicates the central bank's cautious optimism amidst ongoing economic challenges.
The backdrop for this MPC meeting was the Consumer Price-based Inflation (CPI), which had surged to 6.83 percent in August. Market analysts and policymakers are now eagerly awaiting the September inflation figures, set to be released in the coming week.
It is important to note that the Indian government has tasked the RBI with maintaining CPI inflation at 4 percent, with a permissible margin of 2 percent on either side. This mandate underscores the significance of price stability in India's economic landscape.
Inflation has been a persistent concern for the RBI, leading to the earlier series of rate hikes. The central bank had raised rates aggressively to curb rising prices and to ensure that inflation remains within its target range. However, the decision to maintain the policy rate at the current level signals a pause in the tightening cycle, suggesting that the RBI believes its previous measures have had some impact on inflation.
The MPC's unanimous decision underscores the committee's cautious approach towards managing the economy. While there are signs of economic recovery, the central bank remains vigilant due to the uncertainty and potential risks posed by factors such as global economic conditions, supply chain disruptions, and the ongoing COVID-19 pandemic.
In conclusion, the Reserve Bank of India's decision to maintain the policy rate unchanged for the fourth consecutive time highlights its commitment to managing inflation and promoting economic stability. While the growth projection remains steady, the central bank remains watchful of potential risks and uncertainties. This cautious approach reflects the RBI's dedication to fulfilling its mandate and ensuring the Indian economy's long-term resilience.
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