RBI MPC 2024: Central Bank Keeps Repo Rate Unchanged At 6.5% By 4:2 Majority
RBI MPC 2024: Real GDP for FY25 is projected at 7.2%; Governor Shaktikanta Das said that the SDF rate stands at 6.25 per cent, while the MSF and bank rate at 6.75 per cent
RBI MPC 2024: The Reserve Bank of India (RBI) on Friday maintained the benchmark interest rates at unchanged at 6.5 per cent by 4:2 majority, marking the eighth consecutive time the rates have remained unchanged. The last time the central bank hiked its interest rate was in February 2023. The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
SDF and MSF
During his annoucement, RBI Governor Shaktikanta Das said, "The Monetary Policy Committee decided by a 4:2 majority to keep the policy repo rate unchanged at 6.5 per cent per cent. Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.75 per cent."
GDP forecast
The MPC said that the Real GDP for FY25 is projected at 7.2 per cent. Das said, "GDP growth that we are now projecting for the current financial year 2024-25 is 7.2 per cent with Q1 at 7.3 per cent , Q2 at 7.2 per cent , Q3 at 7.3 per cent , and Q4 at 7.2 per cent . The risks are evenly balanced."
Inflation projection
The RBI has projected CPI inflation at 4.5 per cent for FY25. The MPC announced that the CPI inflation in Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, while Q4 at 4.5 per cent.
In his address, Das said that the inflation growth balance is moving favourably. "Growth is holding firm. Inflation continues to moderate, mainly driven by the core component, which reached its lowest level in the current series in April 2024." He stated the deflation in fuel prices is ongoing. Food inflation, however, remains elevated.
"While the MPC took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could possibly derail the path of disinflation. Hence, monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4 per cent on a durable basis. Sustained price stability would set strong foundations for a period of high growth," the governor mentioned.
Ajay Kumar Srivastava, managing director and CEO of Indian Overseas Bank, while welcoming the the decision of RBI maintaining a status quo on the repo rate, said, "The decision to continue remaining focused on the withdrawal of accommodation reflects a balanced approach to sustain economic growth while keeping inflation in check."
Das pointed out that the banking system is sound and resilient backed by asset quality, while it sees rise in profitability. NBFCs also displayed strong financials in FY24. "Recent data suggest there is moderation in loans and advances in unsecured lending after the RBI flagged it last year," the governor added.
The governor also mentioned that central bank transferred Rs 2.11 lakh crore to the government.
Analysts earlier had forecast that the monetary policy committee (MPC) would hold the current interest rate of 6.5 per cent due to the ongoing economic growth, which has been gaining momentum since February 2023.
The MPC began its second meeting for the FY25 on June 5, led by the RBI governor, with the decisions announced today. This timing follows closely after the announcement of Lok Sabha election results on Tuesday (June 4).
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