Governor Das further added the monetary policy committee is committed to aligning India’s headline inflation at 4 per cent level.
RBI Monetary Policy: The Reserve Bank of India on Friday retained the repo rate unchanged for fourth time in a row as it maintains a tight vigil on inflation. While announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 6.5 per cent. Notably, the rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
The RBI governor said the MPC will remain watchful of the inflation and remains resolute in its commitment to align inflation to the targeted level. And According to Das, the growth projection has been retained at 6.5 per cent for the current financial year with risks evenly balanced.
Significantly, in its last three meetings in April, June, and August, the RBI kept the repo rate unchanged at 6.5 per cent.
What Is RBI Repo Rate?
The repo rate is the interest rate at which the RBI lends to other banks. Rating agency Crisil also predicted that the monetary policy committee will maintain the policy rate in the October meeting. Crisil’s August report titled ‘RateView – CRISIL’s outlook on near-term rates’ suggests that a 25 basis point rate cut in early 2024 is a conditional possibility.
Why Did RBI Retain Repo Rate Unchanged?
On why RBI retained repo rate unchanged, Governor Das said after a detailed assessment of the evolving macroeconomic and financial developments and the outlook, RBI’s Monetary Policy Committee decided unanimously to keep the Policy Repo Rate unchanged at 6.5%.
Giving details, RBI Governor Shaktikanta Das said that macroeconomic stability and inclusive growth are the fundamental principles underlying our country’s progress.
“The policy mix that we have pursued during recent years of multiple and unparalleled shocks has fostered macroeconomic and financial stability. The twin balance sheet stress that was encountered a decade ago has now been replaced by a twin balance sheet advantage with healthier balance sheets of both banks and corporates,” he added.
Panel Committed To Align India’s Headline Inflation
Governor Das further added the monetary policy committee is committed to aligning India’s headline inflation at 4 per cent level.
The governor also noted 5 out of the 6 MPC members are for remaining focused on “withdrawal of accommodation” in monetary policy stance so as to ensure the inflation progressively aligns with the target, while supporting growth.
RBI Predicts Retail Inflation at 5.4%
The Reserve Bank of India on Friday kept its retail inflation forecast unchanged and saw it averaging 5.4 per cent in the financial year 2023-24. The central bank decided to keep the policy rate unchanged for the fourth time in a row as it maintains a tight vigil on inflation.
Stressing that the Reserve Bank has identified high inflation as a major risk to macroeconomic stability and sustainable growth, Governor Shaktikanta Das said the September retail inflation number may be lower than August and July prints.
Headline inflation in India rose to 7.8 per cent in July due to a surge in prices of food items like wheat, rice and vegetables, including tomatoes, to later fall to 6.8 per cent in August. Inflation data for September is due in next few days.