RBI Monetary Policy: Repo rate remains unchanged at 6.5%

The Reserve Bank of India's (RBI) monetary policy committee (MPC) on Thursday has decided to keep the repo rate unchanged at 6.5%, RBI governor Shaktikanta Das said.  

For the fiscal 2023–24, the second bimonthly monetary policy meeting took place over a three-day period beginning on Tuesday, June 6, and ending on Thursday, June 8.

The policy repo rate was predicted to remain at 6.5% by the street. The market anticipated the RBI would keep the policy repo rate at 6.5 percent. Experts claim that the lowering of retail inflation in April and the possibility for future decreases demonstrate the effectiveness of earlier policy rate moves.

The MPC retained the repo rate at 6.5% in its first bimonthly policy meeting for the new fiscal year 2023–24 (FY24), which was held on April 6. Since last May, the repo rate has already been increased by a total of 250 basis points in an effort to bring down in inflation.

RBI Monetary Policy Live: MPC keeps repo rate unchanged at 6.5%; FY24 GDP growth forecast retained at 6.5%

The central bank has kept stability as a priority, according to RBI Governor Shaktikanta Das. Fundamentals for the domestic economy are improving. He added that there is still more work to be done in terms of normalising policy around the world.

The margin standing facility (MSF), the bank rates, and the standing deposit facility (SDF) will all stay at 6.25% each.

"We can derive satisfaction from the fact that Indian economy and finance sector stand out as resilient," said Das.

According to Das, the MPC also decided to continue focusing on the withdrawal of accommodations by a vote of 5 out of 6 members.

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Inflation

Das stated that the headline inflation is higher than the target of 4% and is expected to stay higher for the rest of the year. From a 5.2% projection in its April policy, the RBI has lowered its inflation target to 5.1%.

According to the most recent data, headline inflation is still above goal, and the predictions for 2023–2024 indicate that this will continue.

The CPI inflation print for March–April has corrected since the April 2023 policy review and has fallen below the RBI's upper tolerance threshold of 6%. This has given the RBI comfort, allowing it to maintain the same policy rates. April saw a drop in retail inflation in India to 4.70%, the lowest level in 18 months. The RBI's tolerance range was once again met by India's headline inflation. Headline inflation in India was 5.66% in March.

CPI inflation is projected at 5.1% for 2023-24, with Q1 at 4.6%, Q2 at 5.2%, Q3 at 5.4%, and Q4 at 5.2%.

GDP

Shaktikanta Das stated that real GDP growth is projected to be 6.5% for FY24, with Q1 at 8%, Q2 at 6.5%, Q3 at 6%, and Q4 at 5.7%.

Das further pointed out that the GDP growth in 2022–2023 was greater than expected and is still going strong. He said that MPC will remain vigilant and will take additional policy action as and when required to keep inflation expectations anchored and lower inflation to 4%.

According to monetary policy statement, the minutes of the MPC’s meeting will be published on Thursday, June 22, and the next meeting of the MPC is scheduled during August 8-10, 2023.

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