The Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced on Friday that the monetary policy committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 6.50 percent.
During the policy announcement, 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 per cent".
“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,” Das said.
He added, “The twin balance sheet stress that was encountered a decade ago has now been replaced by a twin balance sheet advantage with healthier balance sheets of both banks and corporates.”
This is the fourth time that the MPC has decided to keep the benchmark repo rate unchanged.
Prior to this, from May last year until April 2023, the committee had raised the repo rate by 250 basis points.
To ensure that retail inflation stays within the target of 4 percent, the central bank's committee, with a majority of 5:1, has chosen to maintain its withdrawal of accommodation stance, according to Das.
As mandated by the central government, the RBI is responsible for keeping the consumer price index (CPI)-based inflation at 4 percent, with a margin of 2 percent on either side.
In August, India's retail inflation decreased to 6.83 percent from a 15-month high of 7.44 percent in July.
According to the RBI governor, retail inflation is expected to ease in September. However, there is concern about a potential threat due to a decline in kharif sowing.
The RBI has maintained its CPI-based inflation forecast at 5.4 per cent for FY24. The forecast for Q2FY24 has been revised slightly upwards from 6.2 per cent to 6.4 per cent.
On the other hand, the forecast for Q3 has been reduced to 5.6 per cent from 5.7 per cent, and the projection for Q4 remains unchanged at 5.2 per cent.
The inflation projection for Q1FY25 has also been maintained at 5.2 per cent.
The RBI has also retained the real gross domestic product (GDP) forecast for 2023-24 (FY24) at 6.5 per cent, Shaktikanta Das said.
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