RBI keeps repo rate unchanged at 6.50 per cent

In its latest Monetary Policy Statement, the Reserve Bank of India (RBI) has opted to maintain the policy repo rate under the liquidity adjustment facility (LAF) at 6.50 per cent. The decision was announced following the resolution of the Monetary Policy Committee (MPC) meeting held from February 6 to 8, 2024.

The RBI's decision to keep the policy repo rate unchanged aligns with its objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent while supporting economic growth. Consequently, the standing deposit facility (SDF) rate remains steady at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate are maintained at 6.75 per cent.

According to the MPC, the focus remains on withdrawing accommodation to ensure that inflation progressively aligns with the target while sustaining growth. The decision reflects the assessment of the current and evolving macroeconomic situation, both globally and domestically.

Globally, the outlook suggests steady growth in 2024, albeit with fluctuations in inflation and financial market sentiments. Domestically, economic activity is strengthening, with real gross domestic product (GDP) expected to grow by 7.3 per cent in 2023-24, supported by robust investment activity and strong performance in the manufacturing and services sectors.

Looking ahead, the RBI projects continued economic recovery in 2024-25, driven by factors such as improved household consumption, private investment, and government expenditure. However, risks persist, including geopolitical tensions and volatility in international financial markets.

On the inflation front, the RBI anticipates moderation, considering factors such as rabi sowing surpassing last year's levels and effective supply-side responses to food price pressures. Despite volatility in crude oil prices, the projection for CPI inflation for 2023-24 stands at 5.4 per cent, with a downward trajectory expected for the following year.

The MPC's decision to maintain the policy repo rate was supported by Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and Shri Shaktikanta Das. Prof. Jayanth R. Varma voted for a reduction in the policy repo rate by 25 basis points.

The minutes of the MPC's meeting will be published on February 22, 2024, with the next meeting scheduled for April 3 to 5, 2024.