RBI keeps repo rate unchanged at 6.50%, lowers inflation forecast for FY24
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Mumbai: The Reserve Bank of India (RBI) concluded its three-day Monetary Policy Committee (MPC) meeting today, led by Governor Shaktikanta Das, and announced its decision on key policy rates. In a move aimed at maintaining stability, the RBI decided to keep the policy repo rate unchanged at 6.50 per cent for the second consecutive time.
The MPC, comprising six members, unanimously agreed to maintain the current repo rate, signalling a cautious approach to monetary policy. Governor Das emphasized the committee's commitment to gradually withdrawing accommodation to ensure that inflation aligns with the target while supporting economic growth.
Highlighting the prevailing inflationary pressures, Governor Das acknowledged that headline inflation remains above the 4 per cent target and is expected to stay elevated throughout the rest of the year. Consequently, the RBI revised its inflation forecast for the financial year 2023-24, lowering it to 5.1 per cent from the previous estimate of 5.2 per cent.
The decision to maintain the repo rate reflects a moderation in inflation over recent months. The RBI began a series of interest rate hikes in May 2022, implementing six consecutive increases totalling 250 basis points, as part of its efforts to curb inflationary pressures.
Governor Das stressed that sustained disinflation in core inflation would be crucial for achieving the desired alignment of headline inflation with the target. He also highlighted the anticipated deceleration in global economic activity in 2023 due to factors such as elevated inflation, tight financial conditions, and geopolitical tensions.
In terms of economic growth projections, the RBI forecasts a GDP growth rate of 8 per cent for the first fiscal quarter of FY2024, followed by 6.5 per cent in Q2, 6 per cent in Q3, and 5.7 per cent in Q4. The RBI retained its GDP growth projection for the entire financial year 2023-24 at 6.5 per cent.
The MPC's decision to keep the repo rate unchanged reflects the central bank's cautious approach toward balancing the objectives of curbing inflation and supporting economic growth. With inflationary pressures being closely monitored and an adjusted inflation forecast, the RBI aims to navigate the challenges posed by global economic conditions and maintain stability in the Indian economy.