Mumbai : The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday unanimously decided to keep the policy repo rate unchanged at 5.25 percent, while maintaining its neutral policy stance amid rising global uncertainties. RBI Governor Sanjay Malhotra said the MPC had undertaken a detailed assessment of evolving macroeconomic and financial conditions before voting unanimously to leave the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25 per cent.
The repo rate is the interest rate at which the RBI lends money to commercial banks for short-term funding requirements. Decisions on the benchmark rate are closely watched as higher rates typically make loans such as home, vehicle and business loans more expensive, while lower rates reduce borrowing costs and support consumption and economic activity.
Explaining the rationale behind the decision, Malhotra said the global economy continues to face unprecedented challenges, including disruptions to key trade routes and supply chains, heightened market volatility and cautious business sentiment. It is important to not only confront and address these challenges, but also, at the same time, take this as an opportunity to further enhance our resilience, he added. Malhotra also flagged the continuing geopolitical impasse in West Asia, rising energy prices and global supply chain disruptions as key risks weighing on the world economy.
While global equity markets remain buoyant, aided by optimism around artificial intelligence-led growth, global bond markets continue to face pressure amid renewed inflation concerns and worries over debt sustainability, the Governor said. The latest decision follows the MPC’s April policy meeting, when it had also unanimously voted to keep the repo rate unchanged at 5.25 per cent while retaining the neutral policy stance.
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