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RBI Governor Shaktikanta Das during a press conference after delivering the Monetary Policy Statement, at the RBI headquarters in Mumbai, Friday, April 5, 2024. (PTI: Photo/Shashank Parade)
The Reserve Bank of India’s Monetary Policy Committee (RBI MPC) has decided to keep the repo rate unchanged at 6.5 per cent for the ninth consecutive time, Governor Shaktikanta Das announced on Thursday. He said a majority of 4-2 took the decision. The committee met from August 6 to 8.
Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent, while the marginal standing facility (MSF) rate and the bank rate remain at 6.75 per cent, Das said.
The RBI MPC has also decided to keep its stance of “withdrawal of accommodation” unchanged with a majority of 4-2. RBI Governor Das said this was to ensure that inflation aligned with the four per cent target while supporting growth.
During the announcement, the governor said that inflation is on a broadly declining trajectory. Adding that flexible inflation targeting framework has worked well.
Headline inflation up to 5.1 per cent in June
Headline inflation after remaining steady at 4.8 per cent during April-may, increased to 5.1 per cent in June, driven primarily by the food component that Das described as “stubborn”. Meanwhile, fuel growth remained in disinflation.
“The expected moderation in headline inflation during the second quarter of financial year 2024-25, on account of favourable base effects, is likely to reverse in the third quarter,” Das explained.
“High food inflation adversely impacts household inflation expectations which adversely impacts headline inflation… MPC may look through high food inflation if it is transitory but in current situation it cannot afford to do so,” Das said.
RBI MPC on domestic growth
Domestic growth has “held up well” due to steady urban consumption and “improving” rural consumption. Based on this the MPC has decided for the monetary policy to “stay the course” and keep vigil on inflation trajectory.
“Ensuring price stability eventually results & supports a period of sustained growth. Without price stability, high growth cannot be sustained. We have decided to focus on inflation and ensure price stability mainly to support growth,” Das said.
Manufacturing has also continued to gain ground driven by domestic demand.
However, the RBI governor added that there may be challenges due to global financial conditions and market volatility.
“Several central banks are moving towards policy pivots. The near term outlook is positive, but see significant challenges to medium term global growth,” he said.
RBI’s GDP projection
For FY25, RBI kept its gross domestic product (GDP) projection unchanged at 7.2 per cent.
Q1 – The RBI brought down projection to 7.1 per cent from 7.3 per cent
Q2 – Unchanged at 7.2 per cent
Q3 – Unchanged at 7.3 per cent
Q4 – Unchanged at 7.2 per cent
For the first quarter of FY26, the RBI expects GDP growth at 7.2 per cent
RBI’s CPI projection
Shaktikanta Das announced that core inflation has been moderated to a “historic low” in May and June, with food inflation contributing to 75 per cent of of inflation in these two months. Food inflation makes up 46 per cent weight in the Consumer Price Index (CPI) basket. While global food prices have showed signs of easing, for July, the monetary policy committee believes that food inflation will need to be continued to be monitored along with mobile tariffs.
For FY25, RBI kept its CPI projection at 4.5 per cent.
Q2 – The central bank increased it forecast to 4.4 per cent from 3.8 per cent.
Q3 – Up 4.7 per cent from 4.6 per cent.
Q4 – Down to 4.3 per cent from 4.5 per cent
For the first quarter of FY26, the RBI expects CPI growth at 4.4 per cent.
This meeting also marks the monetary policy committee’s 50th meeting since its inception in 2016. This inflation targeting network will also complete eight years in September. Das took a moment to address the committee’s ability maintain stability amid growing global geopolitical tensions.
First Published: Aug 08 2024 | 10:52 AM IST
