RBI sticks to status quo for 6th time
The 6-member MPC voted by 5:1 majority to keep repo rate unchanged at 6.5% on the basis of an assessment of the current and evolving macroeconomic situation
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Domestic economic activity is strengthening. As per the first advance estimates released by the NSO, GDP is expected to grow by 7.3% in FY24, underpinned by strong investment activity - Shaktikanta Das, Governor, RBI
Monetary Policy
- It’s last MPC meet of FY24
- Focus on withdrawal of accommodation as retail inflation continues to remain high
- RBI had last raised repo rate in Feb 2023 to 6.5%
- Prior to that, it had 6 consecutive rate hikes of 250bps since May 2022
Mumbai: The Reserve Bank of India (RBI) on Thursday decided to keep policy rate unchanged for the sixth time in a row in view of global uncertainty and the need to bring down retail inflation to 4 per cent.
Following RBI’s decision to maintain status quo, banks and financial institutions will largely keep lending rates stable. The six-member committee voted by 5:1 majority to keep the repo rate unchanged in its last meeting of FY24 and to remain focused on withdrawal of accommodation as retail inflation continues to be above its target of four per cent, said RBI Governor Shaktikanta Das.
RBI had last raised repo rate in February 2023 to 6.5 per cent after six consecutive rate hikes aggregating to 250 basis points since May 2022. Announcing the decision of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das on Thursday said it has decided to keep the policy repo rate unchanged on the basis of an assessment of the current and evolving macroeconomic situation.
MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth, he said. These decisions are in consonance with the objective of achieving the medium-term target for Consumer Price Index (CPI) inflation of 4 per cent within a band of +/- 2 per cent while supporting growth.
Referring to retail inflation, Das said that CPI inflation is projected at 5.4 per cent for 2023-24 with Q4 inflation at 5 per cent.
“Assuming a normal monsoon next year, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 5 per cent; Q2 at 4 per cent; Q3 at 4.6 per cent; and Q4 at 4.7 per cent . The risks are evenly balanced,” he said.
The MPC noted that on the inflation front, large and repetitive food price shocks are interrupting the pace of disinflation that is led by the moderation of core inflation. However, geopolitical events and their impact on supply chains, and volatility in international financial markets and commodity prices are key sources of upside risks to inflation.
“The cumulative effect of policy repo rate increases is still working its way through the economy. The MPC will carefully monitor any signs of generalisation of food price pressures to non-food prices which can fritter away the gains in the easing of core inflation,” he said.
