Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%. The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth. The main considerations underlying the decision are set out in the statement below.
In its last policy review in August, the RBI reduced the repo rate by 0.25% to 6% in August, citing reduction in inflation risks. The rate cut was the first in 10 months and brought policy rates to a near seven-year low. However, retail inflation rose to a five-month high of 3.36% in August due to costlier vegetables and fruits. The consumer price index (CPI) based inflation was 2.36% in July.
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