 "RBI keeps repo rate unchanged at 6.5%, changes stance to neutral")
The Reserve Bank of India (RBI) on Wednesday kept repo rate unchanged at 6.5 per cent adopting a cautious stance to balance inflationary concerns with the need for economic growth.
Announcing the decision after the three-day Monetary Policy Committee (MPC) meet, RBI Governor Shaktikanta Das said, “After assessing the evolving macroeconomic and financial conditions and the outlook MPC decided by a majority of five out of six members to keep the policy repo rate unchanged at 6.5 per cent.”
The repo rate has remained unchanged at 6.5 per cent since February 2023.
The repo rate is the rate at which the RBI lends to banks.
The marginal standing facility that is the MSF rate and the bank rate, stand at 6.75 per cent.
Das said that the MPC has decided unanimously to change the stance of the policy to neutral.
Why RBI kept repo rate unchanged & changed stance to neutral?
The RBI Governor explained why the central bank has kept the interest rates unchanged and changed stance to neutral.
He said that adverse weather events continue to pose risks to food inflation, however, domestic growth has sustained its momentum with private consumption and investment growing in tandem.
The MPC has decided to remain watchful of evolving in the coming months, Das said.
The Governor further said that the MPC considered it appropriate to change stance to neutral and remain unambiguously focused on bringing inflation to target durably.
Impact Shorts
More Shorts“Looking ahead, India’s growth story remains intact with consumption and investment demand momentum being the fundamental drivers,” he further said.
What is ’neutral stance’?
A neutral stance gives RBI flexibility to adjust interest rates based on the direction of inflation, in contrast with the current position of withdrawing accommodation, which eliminates the possibility of rate cuts.
RBI lowers GDP projection to 7% for Q2 FY25
Das announced the real GDP growth for 2024-25 is projected at 7.2 per cent with Q2 at 7 per cent, Q3 at 7.4 per cent, and Q4 at 7.4 per cent.
The real GDP growth for Q1 of next financial year, that is 2025-26 is projected at 7.3 per cent. The risks are evenly balanced.
CPI for Sept expected to see big jump
Das said that the CPI for September is expected to see a big jump due to unfavourable base effects and pick up in food price momentum.
CPI inflation for 2024-25 is projected at 4.5 per cent, with Q2 at 4.1 per cent, Q3 at 4.8 per cent, and Q4 at 4.2 per cent.
With inputs from agencies.
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