The Monetary Policy Committee (MPC), which met for three days (June 5-7) under Reserve Bank of India Governor Shaktikanta Das, has decided to keep the repo rate unchanged at 6.5 per cent. Its stance also continues to be that of “withdrawal of accommodation” on account of high food inflation and global uncertainties.

This is the seventh time in a row that the central bank has kept the key rate unchanged, the last hike being in February 2023.

It was not a unanimous decision, as Das and MPC members Shashanka Bhide, Rajiv Ranjan, and Michael Debabrata Patra voted to keep the policy repo rate unchanged. Ashima Goyal and Jayanth R. Varma wanted the policy repo rate decline by 25 basis points.

The RBI also kept its inflation forecast unchanged at 4.5 per cent for 2024-25. The growth, however, it upwardly revised for the current fiscal to 7.2 per cent, up from 7 per cent.

“The MPC noted that the domestic growth-inflation balance has moved favorably since its last meeting in April 2024,” the RBI press release said. “Economic activity remains resilient, supported by domestic demand. Investment demand is gaining more ground and private consumption is exhibiting signs of revival.”

Although headline inflation is gradually easing, driven by softening in its core component, the path of disinflation is interrupted by volatile and elevated food inflation due to adverse weather events, the RBI said. “For the final descent of inflation to the target and its anchoring, monetary policy has to be watchful of spillovers from food price pressures to core inflation and inflation expectations. The MPC will remain resolute in its commitment to aligning inflation to the 4 per cent target on a durable basis.”

Going forward, high frequency indicators of domestic activity are showing resilience in 2024-25, the RBI said. The south-west monsoon is expected to be above normal, which augurs well for agriculture and rural demand. Coupled with sustained momentum in manufacturing and services activity, this should enable a revival in private consumption.

Investment activity is likely to remain on track, with high capacity utilisation, healthy balance sheets of banks and corporates, government’s continued thrust on infrastructure spending, and optimism in business sentiments. Improving world trade prospects could support external demand, the RBI said.

The headwinds included geopolitical tensions, volatility in international commodity prices, and geo-economic fragmentation.