RBI holds Repo Rate steady at 6.50% amid favorable dynamics

Reserve Bank Governor Shaktikanta Das announced on Friday that the Monetary Policy Committee (MPC) has opted to maintain the repo rates at 6.50 percent. This decision marks the seventh consecutive time that the six-member MPC has chosen to keep the key rates unchanged.

This monetary policy announcement represents the first of the financial year 2024-25. The three-day MPC review meeting, which began on Wednesday, April 3, concluded today, April 5.

Consequently, the Marginal Standing Facility (MSF) rate and the bank rate remain at 6.75 percent, while the Standing Deposit Facility (SDF) rate stays steady at 6.25 percent. The Monetary Policy Committee voted with a 5:1 majority to uphold the withdrawal of the accommodation stance, aiming to ensure that inflation aligns with the target while supporting growth.

Governor Das, during his address, stated, "Since the last policy, the growth-inflation dynamics have played out favorably. Growth has continued to sustain its momentum, surpassing all projections."

"MPC will remain resolute in its commitment to align inflation to RBI's target of 4 percent," Das added. He noted, "Headline inflation has eased to 5.1 percent during both January and February. Core Inflation has also declined steadily over the past 9 months to its lowest level in the series."

"The fuel component of CPI remained in deflation for six consecutive months. Food Inflation pressures, however, accentuated in February," he added.

Referring to inflation as the "elephant in the room," Governor Das remarked, "It appears to have gone out for a walk; we want it to remain in the forest."

"Global trade is expected to grow faster in 2024 although weaker than its historical average. Inflation is moving closer to targets but the last mile of disinflation is turning out to be challenging," said Das.

He further mentioned that India's real GDP is anticipated to expand by 7 percent in the fiscal year 2024-25, with growth rates of 7 percent in the June quarter and 6.9 percent in the September quarter. Subsequently, growth of 7 percent is expected in both the third and fourth quarters.