RBI MPC Meeting: Central Bank Keeps Repo Rate Unchanged At 6.5 Per Cent
RBI MPC Today: Governor Shaktikanta Das said that FY24 GDP forecast unchanged at 6.5 Per Cent
The Reserve Bank of India's (RBI's) monetary policy committee (MPC) headed by Governor Shaktikanta Das on Friday announced to keep policy rate unchanged at 6.5 per cent. This was fourth time in a row that the central opted for a pause in rate hike. Das, during his address, said that the MPC unanimously voted to leave the repo rate unchanged at 6.5 per cent.
Das said while keeping the repo rate unchanged, the MPC voted to remain focused on withdrawal of accommodation by 5 votes to 1. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
Standing Deposit Facility and Marginal Standing Facility rates also left unchanged at 6.25 per cent and 6.75 per cent, respectively.
Das said, "Taking all factors into consideration, Real GDP Growth for the current financial year 2023-23 is projected at 6.5 per cent...The risks are evenly balanced. Real GDP Growth for the first quarter of next financial year 2024-25 is projected at 6.6 per cent." The GDP growth forecast for October-December 2023 left unchanged at 6.0 per cent, for January-March 2024 left unchanged at 5.7 per cent.
The governor said the MPC will remain watchful of the inflation and remains resolute in its commitment to align inflation to the targeted level.
The CPI inflation forecast for April-June 2024 also left unchanged at 6.6 per cent, the governor said during his speech. The CPI inflation forecast for July-September 2023 raised to 6.4 per cent from 6.2 per cent; for October-December 2023 cut to 5.6 per cent from 5.7 per cent; for January-March 2024 left unchanged at 5.2 per cent; forecast for April-June 2024 left unchanged at 5.2 per cent.
Das said significant easing of inflation is expected in September. "But indications are that throughout October-December 2023, food inflation may not see sustained easing. This requires careful monitoring incoming data and the outlook," he said. He said appropriate and timely action is needed to prevent any spillovers from food and fuel price shocks. These are non-negotiable necessities.
The overall tone of the bi-monthly monetary policy remained tilted towards fighting inflation. The government has mandated the RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.
According to official data, India's retail inflation jumped to a 15-month high of 7.44 per cent in July, as prices of vegetables and other food items spiked. Nevertheless, the softening in prices of agricultural commodities since August has offered the MPC some breathing space, which may allow it to refrain from any rate action at the moment. In August, the retail inflation cooled down to 6.83 per cent. However, it was still above RBI's upper tolerance band of 6 per cent.
In his address, the governor said that moderation in system liquidity has led to greater recourse of MSF by banks. There is also skewed liquidity distribution among banks. It is a turning pitch and we will play our shots accordingly.
During the MPC announcements, the governor also said that India is poised to become new growth engine of the world.
Anuj Puri, chairman at ANAROCK Group, said, “The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimised home purchases. If we consider the present trends, the overall consumer market looks bullish across sectors, particularly the automobile and housing markets, which in many ways reflect the health of the economy. We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market.”
Experts earlier said that the RBI is expected to retain the benchmark rate of 6.5 per cent in its latest bi-monthly monetary policy review, amid inflation concerns and other global factors.
The next RBI policy meet is scheduled for December 6-8.
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