RBI keeps key lending rate unchanged at 5.25% despite rising inflation

The six-member Monetary Policy Committee (MPC) unanimously voted to keep the key policy rate unchanged. The panel also retained its monetary policy stance as "neutral", signalling that future policy decisions will remain data-dependent.

The Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, kept the benchmark repo rate unchanged at 5.25% on Wednesday, in line with market expectations, as policymakers chose to wait for more clarity on whether rising global crude oil prices will push up inflation in the country.

The six-member Monetary Policy Committee (MPC) unanimously voted to keep the key policy rate unchanged. The panel also retained its monetary policy stance as "neutral", signalling that future policy decisions will remain data-dependent.

The decision was widely anticipated. A Reuters poll had found that 68 out of 72 economists expected the RBI to leave interest rates unchanged amid rising global uncertainties and inflation risks.

WHY DID RBI KEPT RATES UNCHANGED?

The central bank's decision comes at a time when inflation has edged higher but remains within its comfort range.

Although retail inflation accelerated in recent months due to higher food and fuel prices, economists have said the RBI still has room to wait and assess whether elevated crude oil prices translate into broader inflationary pressures.

The RBI's decision also comes as several central banks across the world have tightened monetary policy in response to rising inflation following geopolitical tensions and higher energy prices.

WHAT DOES THIS MEAN FOR BORROWERS?

With the repo rate remaining unchanged at 5.25%, borrowers with repo rate-linked home loans, vehicle loans and other floating-rate loans are unlikely to see any immediate change in their EMIs.

Banks are also expected to keep lending and deposit rates broadly stable unless there is a significant change in liquidity or funding costs.

Yashank Wason, Managing Director, Royal Green Realty, said, "RBI MPC’s decision to keep the repo rate unchanged at 5.25% is a significant positive note for the real estate industry. The unchanged repo rate will significantly benefit both buyers and developers. For homebuyers, unchanged interest rates mean manageable EMIs which will improve the rate of potential purchasers. For developers this unchanged stance will accelerate the project launches and completion timeline."

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