• UGI USER
  • Apr 06, 2024
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RBI KEEPS REPO RATE ON HOLD AS FOOD PRICES REMAIN HIGH

Why in the news?

RBI maintains a repo rate at 6.50% due to concerns over high food prices despite moderate overall inflation.

Source:eduprep

About the Concern Over Food Prices:

  • RBI remains concerned about the spike in food prices despite a moderation in overall inflation.
  • The Monetary Policy Committee (MPC) decides to keep the policy repo rate unchanged at 6.50%.
  • This marks the seventh consecutive time the rates have been held steady.
  • MPC emphasises the goal of aligning inflation with the target on a durable basis.
  • Satisfaction expressed over progress made in disinflation, but acknowledges the unfinished task.
  • RBI Governor Shaktikanta Das, in a post-meeting press conference, highlights the importance of ongoing efforts to tackle inflation.
  • Emphasises that while progress has been made, achieving the inflation target remains a priority.
Key Monetary Policy Tools:

  • CRR (Cash Reserve Ratio):

○   Percentage of banks’ Net Demand and Time Liabilities kept with the RBI to regulate liquidity.

  • Incremental CRR:

○   Additional requirement by RBI on banks’ liabilities to manage excess liquidity and stabilise the economy.

  • Repo Rate:

○   Interest rate set by RBI for short-term loans to commercial banks, used to control inflation and stimulate economic growth.

About Inflation Measures:

  • Inflation:

○   Sustained increase in general price level of goods and services, reducing purchasing power of money.

  • Headline Inflation:

○   Total inflation comprises a basket of commodities, including food and fuel.

  • Core Inflation:

○   Excludes volatile goods like food and fuel from headline inflation to gauge underlying price trends.

Source:

https://www.thehindu.com/business/Economy/food-price-uncertainties-to-weigh-on-inflation-trajectory-rbi-retains-fy25-forecast-at-45/article68031679.ece#:~:text=The%20spike%20in%20food%20prices,LAF)%20unchanged%20at%206.50%25.