The RBI’s monetary policy committee decides to keep the repo rate unchanged for the sixth time in a row, at 6.5 per cent
The RBI’s monetary policy committee on Thursday decided to keep the repo rate unchanged for the sixth time in a row, at 6.5 per cent. The decision has been taken with 5 members in favour of the decision out of the total 6. The RBI has kept the FY24 GDP projection unchanged at 7 per cent. It has also kept inflation forecast unchanged at 5.4 per cent for 2023-24.
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The policy stance continues to be ‘withdrawal of accommodation’.
The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
Presenting the sixth and last bi-monthly monetary policy of FY24, RBI Governor Shaktikanta Das on Thursday said, “Inflation is on a downward trajectory. Our multipronged policies have worked well to keep the financial system stable.”
He said ongoing wars, and new flashpoints including the Red Sea crisis impart uncertainty to the global outlook, and monetary policy continues to be actively disinflationary.
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On the Indian economy, Das said, “This is the 3rd successive year of growth above 7 per cent, FY24 momentum is expected to continue in FY25.”
For almost a year, the Reserve Bank has kept the short-term lending rate or repo rate stable at 6.5 per cent. The benchmark interest rate was last raised in February 2023 to 6.5 per cent from 6.25 per cent to contain inflation driven mainly by global developments.
The retail inflation in the current financial year has declined after touching a peak of 7.44 per cent in July 2023, it is still high and was 5.69 per cent in December 2023, though within the Reserve Bank’s comfort zone of 4-6 per cent.
The MPC is entrusted with the responsibility of deciding the policy repo rate to achieve the inflation target, keeping in mind the objective of growth.
In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in each of the five subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.
The MPC consists of three external members and three officials of the RBI.
The external members on the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R Varma. Besides Governor Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).
