RBI MPC 2024: The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.
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The Reserve Bank of India Monetary Policy Committee (MPC) has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent. The decision of the panel was announced by RBI Governor Shaktikanta Das on Thursday.
Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the bank rate at 6.75 per cent.
The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.
Why Did RBI Keep The Repo Rate Unchanged?
Based on an assessment of the current and evolving macroeconomic situation, the MPC decided to keep the key rates unchanged. While announcing the decisions, the RBI Governor said these decisions align to achieve the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
RBI is maintaining a tight vigil on inflation. Das said MPC will remain watchful of food inflation so that the benefits gained are not frittered away.
Inflation in India remains above the RBI’s target of 4% with a buffer of +/- 2%. In December, the Consumer Price-based Inflation (CPI) stood at 5.69 per cent. Maintaining the current repo rate could help control inflation.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
This is the first bi-monthly policy following the presentation of Interim Budget 2024-25 last week.
GDP Projections
RBI has projected a GDP growth of 7 per cent for 2024-25 financial year, which is lower than the 7.3 per cent expansion estimated for the current fiscal.
Das said rural demand continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex.
Das said there are signs of revival in private investments. The real GDP for 2024-25 is projected to grow at 7 per cent, with June and September quarters growth at 7.2 per cent and 6.8 per cent, respectively.
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The growth in December and March quarters is projected at 7 per cent and 6.9, per cent, respectively. Das said domestic economic activity remains strong and growth in the current fiscal as per estimates by the NSO is 7.3 per cent.
“The momentum of 2023-24 is expected to continue in 2024-25 fiscal,” Das said.
