RBI keeps repo rate unchanged at 6.5 pc, raises FY24 GDP growth forecast to 7 pc
Mumbai : As widely expected by markets and policy-watchers, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday decided to keep the policy repo rate unchanged at 6.50%.
With the central bank maintaining the status quo on key lending rates, EMIs for housing, cars, businesses, and other loans would not rise.
“After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the Monetary Policy Committee (MPC) decided unanimously to keep the policy repo rate unchanged at 6.5%. Consequently, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and the bank rate are at 6.75%,” said RBI Governor Shaktikanta Das while making the bi-monthly Monetary Policy statement.
The MPC also decided, by a majority of 5 out of 6 members, to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
“This policy is entirely in conformity with our pre-policy expectations. In view of the evolving growth-inflation trade-off, the MPC took the right call in holding the rates steady,” said Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings.
On the rationale behind the MPC decision, the RBI Governor said that since the last policy, consumer price index (CPI)-based headline inflation has moderated to 4.9% in October from 7.4% in July.
Further, moderation was observed in all components of CPI, namely food, fuel, and core (CPI excluding food and fuel).
“There has been broad-based easing in core inflation, which is indicative of successful disinflation through monetary policy actions,” Das said.
He, however, said the near-term outlook is masked by risks to food inflation, which might lead to an inflation uptick in November and possibly in December this year.
“Against this backdrop, the MPC decided to keep the policy repo rate unchanged at 6.5 per cent but remains highly alert and prepared to undertake appropriate policy actions as warranted. Monetary policy must continue to be actively disinflationary to ensure fuller transmission and anchoring of inflation expectations. The rate action is, so far, still working its way into the economy. Hence, the MPC decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth,” the RBI Governor said.
The RBI has projected CPI inflation at 5.4% in the current financial year.
With domestic economic activities holding up as reflected in the GDP growth in the second quarter of this year, the central bank revised its FY24 GDP growth estimate to 7% from 6.5% earlier.
“Real GDP growth for 2023–24 is projected at 7%, with Q3 at 6.5% and Q4 at 6%,” said the RBI Governor.