What’s the News?
RBI keeps key interest rates steady
What does that mean?
The monetary policy committee (MPC) of RBI has retained the key rates in its policy review amid rising inflationary pressure and lower than expected contraction of the economy. The repo rate was left unchanged at 4% while the reverse repo rate or the key borrowing rate stayed at 3.35%.
The MPC has noted that inflation risks remain high. The MPC now projects CPI inflation at 6.8 % for Q3 of FY 21 (Financial Year 2021), 5.8 % for Q4 of FY21 and 5.2 % to 4.6 % in H1 of FY 22, with risks broadly balanced.
The MPC has improved its forecast on economic growth to -7.5% in FY21 compared with the earlier estimate of -9.5%. The RBI guidance clearly states that the policy is tuned towards reviving growth and tackle the impact of Covid-19 on the economy.
While the economic prospects seem to have improved recently, retail inflation continued to rise and reached 7.61% in October. This RBI policy sounds like a growth supportive one.
How does this affect your wealth?
RBI has maintained status quo and continues to maintain its accommodative stance well into the next financial year to revive growth. The RBI decision was in line with the market expectation and the equity market has reacted positively to RBI’s stance.
This also means that lending rates in the banking system and EMIs on home, auto and personal loan etc more or less remain steady. The impact on your wealth is likely to be minimal as the status quo is maintained.