Shaktikanta Das, Governor,RBI
“Uncertainties related to food inflation need to be monitored. Need inflation reduction to 4 per cent level on a durable basis while supporting growth,” RBI Governor Shaktikanta Das said
Mumbai: The Reserve Bank of India(RBI) on Friday decided to keep the policy rate unchanged for the eighth time in a row, saying it will maintain a tight vigil on inflation.
The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
However, it raised the growth projection to 7.2 per cent from an earlier estimate of 7 per cent for the current financial year.
Announcing the second bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.
He said MPC will remain watchful of elevated food inflation amid the expectation of a normal monsoon.
Das stated that food inflation remains a big worry for the RBI. The forecast of an above-normal monsoon augurs well for the Kharif Crop outlook, he said.
“Uncertainties related to food inflation need to be monitored. Need inflation reduction to 4 per cent level on a durable basis while supporting growth,” Das said.
The central bank governor informed that while the core CPI inflation continued to soften for the eleventh straight month since June last year, persisting food inflation offset those gains.
The repo rate was last changed in February 2023, when it was hiked from 6.25 per cent to 6.5 per cent. Between May 2022 and February 2023, the repo rate was raised by 250 basis points (bps).
The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company said,“MPC has delivered a ‘Fairly Neutral Policy’ with a positive undertone. The MPC has been upbeat on growth and nudged the GDP forecasts higher, while yet being cognizant and cautious of achieving the last mile of disinflation. While MPC refrains from giving cues on further rate actions, 4:2 voting pattern is indeed encouraging and indicative of a possible change in stance in the near future.”
The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators. The other meetings are scheduled for August 6-8, 2024; October 7-9, 2024; December 4-6, 2024; and February 5-7, 2025. Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.