The Reserve Bank of India (RBI) retained the repo rate at 4% and the reverse repo rate at 3.35 percent, keeping a 'accommodative' policy stance, notwithstanding the ongoing impact of the Omicron variant of Covid-19 across the globe including in India. The central bank has kept the status quo for the ninth time in a row, despite lingering concerns about further growth.
However, there were predictions that the RBI would raise the reverse repo rate and switch its policy stance to 'Neutral' from 'Accommodative' in response to rising inflation, but the top bank maintained its current position. The important lessons from the monetary policy outcome are listed below.
The MPC agreed to keep the accommodating posture in place for as long as it is needed to recover and sustain growth on a long-term basis, as well as to continue to minimise the impact of COVID-19 on the economy while ensuring that inflation remains within the target.
The central bank also stated that high-frequency signs predict a drop in demand in January 2022, owing to the drag on contact-intensive services caused by the country's rapid adoption of the Omicron model.
"Among the urban demand indices, consumer durables and passenger vehicle sales fell in November-December due to supply restrictions, while domestic air travel fell in January due to Omicron," the RBI said in a statement.
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