rbi monetary policy feb 2022: RBI’s focus on growth, RBI monetary policy update, repo rate unchanged again

The Monetary Policy Committee (MPC) of the Reserve Bank did not make any change in the interest rates. This is the tenth time in a row that the rates have remained unchanged. The policy rate was last changed on 22 May 2020. Then interest rates were reduced. The rate at which RBI lends to banks, the repo rate was kept at 4 per cent. The interest rate that banks get on depositing money with RBI, i.e. reverse repo rate, was also allowed to remain at 3.35 percent. It was being speculated that this time the RBI would increase the reverse repo rate by 0.15-0.40 percent, but it was not done. The reason for the Reserve Bank not to change rates is because it wants to support the economic recovery. Earlier in the budget, the government had proposed a more than 35 percent increase in capital expenditure in the financial year 2023. The Center has to do this because consumer demand is weak right now. As a result, there is not much investment from the private sector. The government feels that by spending more money, the rate of economic growth will accelerate. So employment will increase and people will spend more money. This can solve the demand problem. The Reserve Bank has, in a way, supported this policy of the government by not changing the interest rates.

RBI Monetary Policy update: Your loan installment will not increase, RBI has not changed repo rate
Not only this, the Reserve Bank also said that until the growth becomes sustainable, it will not make loans expensive. But it has a hitch. Inflation is increasing in the country. The retail inflation rate may be below the Reserve Bank’s cap of 6 per cent, but the wholesale inflation rate is very high. Due to this, the retail inflation rate will increase in the coming times. Meanwhile, the price of crude oil has increased significantly. Although the prices of petrol and diesel have not increased in the country for more than three months in view of the elections in five states, but this situation may change after the elections are over. Then oil prices will also have an effect on inflation. On the other hand, the inflation rate in America has reached close to 7 percent, which is the highest since the early 80s. Therefore, the process of increasing interest rates there may start from March. For this reason, foreign institutional investors have been withdrawing money from the Indian stock market for a few months. The Reserve Bank will have to ensure that the rupee does not weaken due to this. It also has to be seen that there is no bubble in any asset class due to cheap interest rates and above all, inflation should not be uncontrollable as it is most harmful especially for the poor.