RBI Chooses to Maintain Current Policy Rates

Published : 12 April 2024
Updated : 23 May 2024
RBI Chooses to Maintain Current Policy Rates

The Monetary Policy Committee (MPC) of the Reserve Bank of India agreed to maintain the "withdrawal of accommodation" organize and maintain the primary policy rate, or repo rate, at 6.5% over its most recent meeting. The six-member MPC, headed by RBI Governor Shaktikanta Das, made decisions on both issues by a majority vote of five to one.

Reasons for Maintaining Current Rates

The RBI Governor gave multiple reasons for maintaining the policy rates, including:

1. Economic Forecast
The overall picture of the economy is still favorable, although certain challenges in specific areas. Overall inflation has decreased, but growing food inflation is keeping headline statistics high. However, the low core inflation will soothe the RBI, since strong growth has largely prevented inflation.

2. Concerns About Inflation
Governor Das noted that the MPC is watchful for upside risks to inflation that might scuttle the process of disinflation. He also noted that uncertainty around food prices continues to present difficulties. He stated that the CPI inflation rate must maintain its current mild trend and consistently match the target.

3. GDP Growth Forecast
Comparing the 7.6% increase estimated by the NSO for FY24, the RBI keeps its prediction for GDP growth in FY25 at 7%. 7 percent increase in Q1 of FY 25, 6.9 percent in Q2, and 7 percent growth in Q3 and Q4 are the anticipated growth rates. The picture is vulnerable to headwinds from political conflicts, volatility in worldwide financial markets, and geo-economics fragmentation.