RBI keeps repo rate untouched at 6.5%

07 Jun 2024 CW Team

The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, stated that the retail inflation rate is still higher than the MPC's objective of 4%, which is why the MPC opted to maintain the policy repo rate at 6.5%. The choice was made in the midst of worldwide and domestic economic uncertainty. According to the RBI Governor, the MPC made the majority decision to maintain the current repo rate. He conveyed that upon the realisation of the projected GDP growth of 7.2% for 2024?25, it would mark the fourth consecutive year of growth at or above 7%. He noted that the headline CPI has been following a disinflationary trajectory, with monetary policy playing a significant role in this trend. He highlighted a decline in headline inflation by 2.3 percentage points between the first quarter of 2022?23 and the fourth quarter of 2023?24, attributing it to both supply-side developments and government measures. However, he acknowledged that repeated food price shocks had impeded the overall disinflation process. Regarding the rates, he mentioned that the standing deposit facility (SDF) rate remains at 6.25%, with the marginal standing facility (MSF) rate and the bank rate staying at 6.75%. Governor Shaktikanta Das underscored the importance of adopting a balanced approach to monetary policy. He reaffirmed the Monetary Policy Committee's commitment to gradually withdrawing accommodation to ensure inflation aligns with the targeted range. He emphasised that monetary policy must persist in its disinflationary stance and steadfastly work towards aligning inflation with the 4% target on a durable basis to sustain price stability. The RBI revised its growth projections for the current financial year 2024?25, forecasting a GDP growth rate of 7.2 %. The quarterly growth projections stand at 7.3 % for Q1, 7.2 % for Q2, 7.3 % for Q3, and 7.2 % for Q4.

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