RBI Maintains 6.5% Repo Rate for the Sixth Time; FY24 GDP Is Maintained at 7%, Inflation Is Projected at 5.4%

For the sixth consecutive meeting, the monetary policy committee of the RBI voted on Thursday to maintain the repo rate at 6.5%. Out of the total six members, five have voted in favor of the decision. The RBI has not altered its forecast for the FY24 GDP, which stands at 7%. Additionally, it has maintained the 5.4 percent inflation estimate for 2023–2024.

“Withdrawal of accommodation” is still the official policy position.

Additionally, the RBI MPC maintained the MSF and Bank Rates at 6.75 percent and the SDF at 6.25 percent. The interest rate corridor’s bottom band is known as the SDF and the upper band as the MSF.

“Inflation is on a downward trajectory,” RBI Governor Shaktikanta Das said on Thursday, presenting the sixth and last bi-monthly monetary policy of FY24. Our multifaceted approach to maintaining the stability of the financial system has proven effective.

He said that the world picture remains unclear due to continuous conflicts and new flashpoints like the Red Sea situation, and that monetary policy is still actively working to reduce inflation.

“This is the third successive year of growth above 7%, FY24 momentum is expected to continue in FY25,” Das said in reference to the Indian economy.

The Reserve Bank has maintained the short-term lending rate, sometimes known as the repo rate, at 6.5% for almost a full year. In order to control inflation, which is mostly driven by changes on a worldwide scale, the benchmark interest rate was last increased in February 2023, from 6.25 percent to 6.5% percent.

Although it is still high and was 5.69 percent in December 2023, retail inflation in the current fiscal year has decreased from its top of 7.44 percent in July 2023. Nevertheless, it is still within the Reserve Bank’s comfort zone of 4-6 percent.

The MPC is charged with setting the policy repo rate with the goal of growth in mind in order to meet the inflation target.

The MPC increased the policy rate by 40 basis points at an off-cycle meeting in May 2022. Thereafter, rate rises of differing magnitudes were implemented in each of the next five sessions until February 2023. Between May 2022 and February 2023, there was a total increase of 250 basis points in the repo rate.

Three individuals from outside the MPC and three RBI officials make up the group.

Jayanth R Varma, Ashima Goyal, and Shashanka Bhide are the panel’s external members. In addition to Governor Das, Michael Debabrata Patra, the Deputy Governor, and Rajiv Ranjan, the Executive Director, are the additional RBI representatives in the MPC.