Business

RBI Retains Repo Rate At 6.5% For 6th Consecutive Time Amid Inflation Concerns

By
OB Bureau

New Delhi: With retail inflation is still hovering above the medium term target of 4 per cent, the Reserve Bank of India (RBI) opted to retain its key policy rate for the sixth consecutive time at 6.5 per cent during the Monetary Policy Committee (MPC) meeting on Thursday.

Repo is the rate at which the RBI lends short-term funds to banks.

“Uncertainty in food prices continue to impinge on headline inflation. Momentum in domestic activities continues to be strong,” RBI Governor Shaktikanta Das said in the briefing.

He emphasised on the necessity for the monetary policy to remain actively dis-inflationary. Five out of the six members voted in favour of the rate decision. The panel also retained the monetary policy stance unchanged at withdrawal of accommodation.

“Global growth is expected to remain steady in 2024, with heterogeneity across regions. Though global trade momentum remains weak, it is exhibiting signs of recovery and is likely to grow faster in 2024. Inflation has softened considerably and is expected to moderate further in 2024,” Das added.

Since the April monetary policy in 2023, the RBI has kept the repo rate unchanged at 6.5 per cent.

During its previous MPC meeting on December 8, the RBI had revised the growth projection for the current fiscal to 7 per cent, up from the earlier estimate of 6.5 per cent while maintaining the repo rate unchanged for the fifth consecutive time.

The MPC is determining the policy repo rate to achieve the inflation target, while it is also considering the goal of fostering an economic growth.

While retail inflation in the current fiscal has decreased since reaching a peak of 7.44 percent in July 2023, it remains elevated, standing at 5.69 percent in December 2023. However, it is within the Reserve Bank’s target range of 4-6 percent, thus staying within the central bank’s comfort zone.

The central bank governor last month, stated that the Indian economy is projected to achieve a growth rate of 7 per cent in the upcoming fiscal, with expectations of further easing in inflation. Das also acknowledged the Centre for the structural reforms it has implemented in recent years, noting that these reforms have enhanced the medium and long-term growth outlook for the Indian economy.

OB Bureau

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