The RBI MPC on Thursday unanimously decided to keep the repo rate unchanged at 6.50 per cent. The pause comes after six consecutive rate hikes since May 2022, and the RBI has raised the repo rate by 250 bps since then. The RBI MPC also voted to remain focussed on ‘withdrawal of accommodation’ by 5:6 majority. This is to ensure that inflation aligns with target while focussing on growth.
While presenting the first bi-monthly monetary policy statement of FY24, RBI Governor Shaktikanta Das on Thursday said, “The global economy is witnessing a renewed phase of turbulence with fresh headwinds from the banking sector turmoil in advanced economies.”
SDF will remain unchanged at 6.25 per cent, and MSF and Bank Rates will be maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
The reverse repo rate and CRR also remained unchanged at 3.35 per cent and 4.5 per cent, respectively.
On inflation, he said the global inflation has moderated in the recent month. In India, the RBI governor said that the retail inflation is expected to moderate to 5.2 per cent for FY24, from 5.3 per cent projected earlier. The inflation is expected to be at 5.1 per cent in Q1.
He also said the current financial year points towards softening of inflation; war against inflation to continue until there is durable decline.
On GDP growth, the RBI marginally raised economic growth projection for FY24 to 6.5 per cent from earlier estimate of 6.4 per cent.
The RBI is mandated to keep the CPI inflation rate at 4 per cent, with a flexibility of 2 per cent up or down. However, according to the latest data available, India’s CPI inflation in February 2023 stood at 6.44 per cent, which is beyond the RBI’s upper limit of 6 per cent for the second consecutive month. The retail inflation had stood at 6.52 per cent in January 2023.
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