RBI MPC Meet Updates: The Reserve Bank of India monetary policy committee has decided to keep the policy repo rate unchanged at 6.5 per cent,” said governor Shaktikanta Das on Friday.
“…The Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5%. Consequently, the Standing Deposit Facility rate remains at 6.25% and the Marginal Standing Facility rate and the Bank Rate at 6.75%,” Das said.
The rate increase cycle was paused in April after six consecutive rate hikes, aggregating to 250 basis points since May 2022. Announcing the bi-monthly monetary policy, Das said the MPC unanimously decided to keep the repo rate unchanged at 6.5 per cent.
He said the MPC will remain “actively disinflationary”.
According to him, the growth projection has been raised to 7 per cent for the current financial year from 6.5 per cent earlier. The RBI projected the Consumer Price-based Inflation (CPI) based retail inflation at 5.4 per cent for the current fiscal.
The MPC meeting took place against the backdrop of inflation declining to 4.87 per cent in October. The November print of inflation is expected to be released next week. The government has mandated the RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.
Retail inflation in India continued to ease through October, supported by a relative decline in some of the sub-indexes. The October consumer price index (CPI) came at a four-month low of 4.87 per cent against 5.02 per cent the previous month. Retail inflation in India though, is in the RBI’s 2-6 per cent comfort level but is above the ideal 4 per cent scenario.
Das said the MPC also decided by a majority of five out of six members to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
Das’s remarks also found mention of firm GDP growth in the second quarter.
The Indian economy grew 7.6 per cent during the July-September quarter of the current financial year 2023-24, remaining the fastest-growing major economy. India’s GDP growth for the April-June quarter grew 7.8 per cent.
The three-day bi-monthly monetary policy committee (MPC) meeting of the RBI began on Wednesday. The RBI typically conducts six bi-monthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators.
For the fourth straight occasion, the monetary policy committee, through its October review meeting, unanimously decided to keep the policy repo rate unchanged at 6.5 per cent, thus maintaining the status quo.
In its past four meetings, it held the repo rate unchanged at 6.5 per cent. The repo rate is the rate of interest at which RBI lends to other banks.
A relative decline in inflation, barring the latest spike, and its potential for further decline may have prompted the central bank to put the brake on the key interest rate. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.
Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
(With inputs from agencies)