RBI Keeps Repo Rates On Hold, Maintains Accommodative Stance

The Reserve Bank of India today kept the policy repo rates on hold, even while maintaining an accommodative policy stance.

While markets expected the reverse repo rate to be hiked, the Reserve Bank of India maintained the reverse repo rate at the existing 3.35%. The policy repo rate is the rate at which the RBI lends money to banks.

Most analysts had expected the accommodative stance to be done away with and a 25 basis hike in the reverse repo rate.

The country's retail inflation, which is measured by the Consumer Price Index (CPI), rose to a five-month high 5.59 per cent in the month of December. The RBI is mandated to have a control over inflation and it uses the policy repo rate and other liquidity measures to do so. Globally, consumers are battling very high inflation.

Most analysts and economists were expecting a hike in the reverse repo rate. Globally, central banks have indicated hiking their interest rates or have begun the process of hiking rates, to tame inflation.

The Bank of England has hiked its interest rates, while US Fed officials have indicated that an interest rate hike by the US Fed is coming as early as March. Currently, the policy repo rate is at 4%, while the reverse repo rate is at 3.35%.