Green Asia

India central bank keeps key rate steady; liquidity measures in focus

MUMBAI : The Reserve Bank of India’s key lending rate was held steady at a fourth consecutive policy meeting on Friday, as widely expected, with investors more focused on the regulator’s liquidity management plan amid a resurgence in inflation.

The country’s monetary policy committee (MPC) kept the repo rate unchanged at 6.50 per cent, in a unanimous decision. Most economists polled by Reuters had expected it to keep rates steady.

It has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.

The RBI also maintained its policy stance of “withdrawal of accommodation” to ensure inflation progressively aligns with the committee’s target while remaining supportive of economic growth, Das said.

Five of six committee members voted in favour of the stance.

Annual retail inflation eased to 6.83 per cent in August, from a 15-month high of 7.44 per cent in July, but remained well above the central bank’s 2 per cent-6 per cent comfort band.

Sharp spikes in food prices have been the main driver as erratic weather conditions hurt production of staples like vegetables, milk and cereals.

High inflation has put the focus back on liquidity management amid the reduced ability to keep hiking rates at the risk of hurting growth and commentary and further measures, if any, are being closely monitored by market participants.

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