RBI August 2024 MPC Meeting: Repo Rate Unchanged At 6.5%, FY25 GDP Growth Projection At 7.2%

MPC Meeting: Shaktikanta Das said the committee maintains inflation forecast at 4.5% while the MSF and SDF rates will remain unchanged at 6.75 per cent and 6.25 per cent, respectively

MPC Meeting: The Reserve Bank of India (RBI) on Thursday maintained the benchmark interest rates at unchanged at 6.5 per cent by 4:2 majority, marking the ninth consecutive time the rates have remained unchanged. In the previous MPC meeting held from June 5-7, the committee kept the benchmark interest rates unchanged at 6.5 per cent. This marked the ninth consecutive time the committee decided to maintain the status quo on key rates.

MSF & SDF rates

Das has confirmed that the Marginal Standing Facility (MSF) and Standard Deposit Facility (SDF) rates will remain unchanged at 6.75 per cent and 6.25 pe rcent, respectively. He noted a significant alignment between market expectations and the MPC's policy stance. He also highlighted that while headline inflation is expected to moderate due to a favorable base effect, this trend may reverse in Q3.

The governor said that domestic growth is resilient, supported by steady urban consumption. The MPC determined that it is crucial for monetary policy to remain consistent while closely monitoring inflation. The committee highloghted maintaining a primary focus on inflation to support sustained economic growth. Das said the MPC will remain watchful of elevated food inflation.

The RBI has revised its CPI inflation forecast for Q2FY25 to 4.4 per cent, up from the previous estimate of 3.8 per cent. For Q3FY25, the forecast has been slightly adjusted to 4.7 per cent from 4.6 per cent, while the Q4FY25 forecast has been lowered to 4.3 per cent from 4.5 per cent. The projection for Q1FY26 CPI inflation stands at 4.4 per cent.

Governor Das states that the MPC may overlook temporary high food inflation but cannot ignore persistently high food inflation due to its potential spillover effects, emphasizing that the public primarily perceives inflation through food prices.

CPI Inflation projection

The RBI has maintained its FY25 CPI inflation forecast at 4.5 per cent, noting that high food price momentum likely persisted through July. The GDP growth targets for Q2FY25, Q3FY25, and Q4FY25 remain unchanged at 7.2 per cent, 7.3 per cent, and 7.2 per cent, respectively. The real GDP projection for Q1FY26 is set at 7.2 per cent.

GDP forecast

However, the GDP growth target for Q1FY25 has been revised to 7.1 per cent from the earlier estimate of 7.3 per cent. Overall, the FY25 real GDP growth projection remains unchanged at 7.2 per cent.

Governor Shaktikanta Das stresses that despite a significant drop in core inflation, the RBI cannot become complacent, highlighting ongoing concerns over food inflation pressures.

The overall financial sector is healthy and stable. Banks and NBFCs will be advised to take remedial action. An unprecedented global outage impacted industries, making it necessary for banks and financial institutions to build frameworks to maintain operational resilience.

The last time the central bank raised the repo rate was in February 2023, after which the committee has consistently kept the key rates unchanged.

The committee also includes members Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, Shashanka Bhide, and Michael Debabrata Patra.