MUMBAI, 7 Jun (Commoditiescontrol): The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), after its meeting which commenced on Wednesday, has decided to maintain the repo rate at 6.5% for the eighth consecutive time. This decision comes shortly after the declaration of the Lok Sabha election results.
RBI Governor Shaktikanta Das, addressing the press conference, announced a revision in the GDP growth projection for FY25, raising it to 7.2% from the previously expected 7%. This upward revision in GDP forecast was positively received by the stock market, with the Sensex climbing nearly 1%, or over 700 points, reaching a level of 75,814 shortly after the policy announcement.
The RBI is mandated by the government to keep CPI inflation at 4%, with a margin of 2% on either side. In April, the Central Bank had also decided to keep the repo rate unchanged at 6.5% while maintaining the policy stance of ‘withdrawal of accommodation.’ Both decisions were taken with a majority vote of 5:1 by the six-member MPC, chaired by Governor Das.
The RBI’s decision to keep the repo rate steady means that external benchmark lending rates linked to the repo rate will not increase, providing relief to borrowers as their equated monthly instalments (EMIs) will remain unchanged. However, lenders might still raise interest rates on loans tied to the marginal cost of fund-based lending rate, where the full transmission of a 250 basis points hike in the repo rate between May 2022 and February 2023 has not yet occurred.
Explaining the rationale behind keeping the rates unchanged, Governor Das reiterated the uncertainties posed by fluctuating food prices, which continue to challenge inflation stability. In April, he emphasized the MPC's vigilance regarding the upside risks to inflation, which could potentially disrupt the disinflation trajectory. Reflecting on past inflation trends, Das remarked, “Two years ago, around this time, when CPI inflation had peaked at 7.8% in April 2022, the elephant in the room was inflation. The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis.”
(By Commoditiescontrol Bureau; +91 98201 3018)
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