The Reserve Bank of India’s Monetary Policy Committee (MPC) has opted to maintain the policy repo rate at 6.5 per cent, citing retail inflation persisting above its target of 4 per cent.
This marks the seventh consecutive meeting where the MPC has opted for a status quo on the repo rate, which is the interest rate at which banks obtain funds from the RBI to address short-term liquidity mismatches.
RBI Governor Shaktikanta Das announced this decision, noting it as the first monetary policy statement of the current financial year 2024-25. “It was decided by a majority of 5:1 to keep the interest rate unchanged at 6.50 per cent. Consequently, the Standing Deposit Facility (SDF) rate remains at 6.25 per cent. Marginal Standing Facility (MSF) rate and the bank remain at 6.75 per cent,” said Das.
The MPC had retained the status quo on policy rates and stance during its last review held in February 2024. Additionally, RBI has maintained the stance of ‘withdrawal of accommodation’.
Furthermore, concerns arise from the India Meteorological Department’s (IMD) recent announcement of above-normal temperatures during April-June, potentially impacting the prices of vegetables, fruits, and other perishable items. “The tight demand-supply situation in certain categories of pulses and the production outcome of key vegetables warrant close monitoring, especially in the background of the forecast of above-normal temperatures in the coming months,” noted RBI Governor Shaktikanta Das.
Looking ahead, Governor Das expressed optimism regarding the outlook for agriculture and rural activity, anticipating a strengthening of rural demand and an improvement in employment conditions, which is expected to bolster private consumption.
The MPC, constituted under the Reserve Bank of India Act, 1934, consists of six members, including three from the RBI, including Governor Shaktikanta Das, and three members appointed by the Central government. The three-day review meeting of the MPC that commenced on April 2 concluded recently.
Governor Das highlighted that growth has sustained its momentum, surpassing all projections, and headline inflation has eased to 5.1 per cent during both January and February.