RBI MPC keeps repo rate unchanged at 6.5%

On Thursday, the Reserve Bank of India’s Monetary Policy Committee (MPC) chose to maintain the repo rate at 6.5 percent for the ninth consecutive meeting. RBI Governor Shaktikanta Das announced that the decision was made with a 4:2 majority vote within the MPC. The committee also decided to continue with its stance on the withdrawal of accommodation.

“We are seeing good amount of convergence between market expectations and RBI policies, they are well aligned,” said Das.

An ET poll consisting of 12 respondents had unanimously predicted the MPC would keep the repo rate unchanged at the end of its three-day meeting, which commenced on August 6, 2024.

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Inflation Forecast and RBI’s Stance

The MPC has kept its inflation forecast for FY25 at 4.5 percent despite concerns over food price trends and rising geopolitical tensions that could impact crude oil prices. The central bank now projects inflation at 4.4 percent for Q2, 4.7 percent for Q3, and 4.3 percent for Q4, compared to previous estimates of 3.8 percent, 4.6 percent, and 4.5 percent, respectively.

RBI Governor Shaktikanta Das has stressed the importance of reducing inflation to the 4 percent target sustainably before considering any policy changes. The RBI continues to face challenges with persistent food inflation, with the “thali” (food platter) serving as a key indicator for analysts. As a result, the MPC is likely to maintain the repo rate at 6.5 percent.

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GDP Growth Forecast

The MPC has maintained its GDP growth forecast for FY25 at 7.2 percent, though it has slightly downgraded the outlook for the first quarter. Governor Das announced that while the growth projections for FY25, Q2FY25, Q3FY25, and Q4FY25 remain unchanged, the forecast for Q1FY25 has been adjusted to 7.1 percent.

In its June 2024 meeting, the MPC had projected a 7.2 percent growth for FY25, with quarterly growth rates estimated at 7.3 percent, 7.2 percent, 7.3 percent, and 7.2 percent respectively. The Indian economy had expanded by 8.2 percent in FY24.