The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5 per cent following the conclusion of its three-day monetary policy committee (MPC) meeting on June 7, 2024.
The repo rate is the interest rate at which the central bank provides loans to commercial banks. The MPC had met in Mumbai this week to deliberate on key policy decisions related to inflation, economic growth and financial stability in the ongoing financial year.
Key Highlights Of MPC Meeting
1] Repo rate unchanged at 6.50 per cent.
2] Decision arrived at by 4:2 majority
3] The majority of MPC focused on the withdrawal of accommodation.
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. 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."
Explaining MPC’s decisions, Das said that deflation in fuel prices is ongoing and the committee has taken note of this and will remain vigilant to any upside risk.
Inflation Projection Retained
The RBI said that the inflation projection has been retained for the fiscal as it was in the last MPC meeting.
RBI projects consumer price index (CPI) inflation at 4.5 per cent for FY25 and CPI inflation is expected to be 4.9 per cent, 3.8 per cent, 4.6 percent, and 4.5 per cent, in Q1, Q2, Q3 and Q4, respectively.
Das further said that the inflation growth balance is moving favourably and growth is holding firm.
The committee also observed that inflation continues to moderate majorly driven by the core component, which reached its lowest level in the current series in April 2024.
“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 derail the path of disinflation,” Das said in a statement.
“The 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,* he added.
RBI Governor On Imports And Heatwave
Das said that private consumption is recovering and revival in rural demand is getting fillip from farm activities. “Non-oil, non-gold imports are in the positive while services growth rebounding,” he said.
Global Growth
RBI expects global growth to continue to ‘sustain’ in 2024. It will likely remain resilient, Das said.
The market expectation on timing and pace of rate cut is changing based on incoming data, according to Das, and domestic economic activity in FY25 has remained resilient.
Monsoon Forecast
Das said an above-normal southwest monsoon as forecast by Indian Meteorological Department (IMD) is expected to boost Kharif production. IMD's forecast is expected to improve Kharif output, he said.
