The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) decided to stick with stability, keeping the policy repo rate at 6.5 percent during its December review meeting. This decision was unexpected. This is the central bank’s fifth consecutive decision to keep interest rates unchanged.
RBI Governor Shaktikanta Das, addressing the media, cited declining inflation as a key factor behind the decision to maintain the status quo in the policy stance. While retail inflation in India has eased, October’s consumer price index (CPI) touched a four-month low of 4.87 per cent, still above the ideal 4 per cent scenario.
Das highlighted that the MPC, with a majority of 5 out of 6 members, is committed to withdrawing accommodation to ensure that inflation progressively aligns with the target while supporting growth. This stance is in line with the central bank’s ongoing efforts to balance economic stability.
The Governor’s remarks also touched upon India’s robust GDP growth, which stood at 7.6 per cent during the July-September quarter, making it the fastest-growing major economy. Despite global economic challenges, India’s economic resilience has been notable.
This three-day bi-monthly meeting marks the end of the year for the RBI, with the MPC deliberating over interest rates, money supply, inflation outlook, and various macroeconomic indicators. The central bank’s decision to maintain the status quo reflects a cautious approach, possibly influenced by a relative decline in inflation, barring recent spikes.
The repo rate, unchanged at 6.5 per cent for the fourth consecutive meeting, is a critical tool in the RBI’s fight against inflation. Despite concerns about rising inflation in many countries, India has managed to navigate its inflation trajectory effectively.
The RBI’s decision to hold the repo rate steady suggests a nuanced approach to monetary policy, considering the delicate balance needed to support economic growth while keeping inflation in check. As we head into the new year, the financial landscape remains dynamic, with the RBI’s moves closely watched for their impact on various sectors of the economy.