RBI maintains repo rates at 6.5 %

The Reserve Bank of India (RBI) kept the repo rates at 6.5 percent on Thursday. The Monetary Policy Committee (MPC) of the central bank unanimously decided to take a sequential pause at its second bimonthly monetary policy meeting of FY24 following a rate hike seen in the previous six consecutive policies.

The RBI’s Monetary Policy Committee met on June 6 and 8. The central bank’s monetary policy is reviewed six times every two months over the course of a year. Out-of-cycle reviews are another option, where the central bank organises additional meetings when necessary.
Announcing the Monetary Policy, RBI Governor Shaktikanta Das said that MPC will continue to take policy actions promptly and appropriately to keep inflation expectations firmly anchored. “Headline inflation is above the target of 4 percent and expected to remain so during rest of the year,” he added.
Shaktikanta underlined once more how resilient and powerful the Indian economy and financial industry are in the face of enormous global headwinds. He added that the geopolitical environment was causing the pace of global economic activity to slow down and that it was imperative to keep a close eye on inflation as it changed.

The RBI Governor went on to say that the MPC has opted to keep its attention on the decision to stop accommodating its policy stance.

From an earlier estimate of 5.2 percent, the Central Bank has reduced the retail inflation outlook for FY24 to 5.1 percent. “RBI retains growth projection at 6.5 percent for FY’24, expects 8 percent growth in Q1, 6.5 percent growth in Q2, 6 percent growth in Q3, and 5.7 percent growth in Q4”, Governor Das stated.
The RBI has also cut its prediction for real inflation during FY24 from an earlier estimate of 5.2 percent to 5.1 percent. According to the governor of the RBI, Q1 GDP growth for this fiscal year is anticipated to be 8%.
“Domestic demand condition remains supportive of growth; rural demand on revival path. RBI will remain nimble in its liquidity management while ensuring adequate resources for productive requirements of economy,” he added.
Raising interest rates is a monetary policy tool that often reduces economic demand and lowers inflation.

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