RBI keeps repo rate unchanged for 9th time in a row at 6.5%
MUMBAI: Reserve Bank of India governor Shaktikanta Das announced the decision of the monetary policy committee to maintain the current rates for the ninth consecutive time, emphasizing the robust demand and the necessity to uphold the declining inflation trend.
“The MPC, with a majority of 4:2, opted to keep the policy report unchanged at 6.5%. As a result, the standing deposit facility rate remains at 6.25%, while the marginal standing facility rate and the bank rate are maintained at 6.75%. The MPC also agreed, by a majority of 4:2, to prioritize the withdrawal of accommodation to ensure a progressive alignment of inflation with the target, while fostering growth,” stated Das. The governor underscored the significant alignment between market expectations and the policies of the RBI.
The governor maintained the growth forecast for FY25 at 7.2% but adjusted the forecast for Q1FY25 to 7.1% from the previous 7.3%. "We slightly changed the growth projection for the first quarter due to new information on certain high-frequency indicators related to expected central expenditure and core industries," explained Das. The governor also kept the inflation forecast for FY25 at 4.5%, though making adjustments to the quarterly forecasts.
Das stressed the importance of focusing on food prices despite the difference between headline inflation and food inflation, highlighting its potential impact on overall inflation.
In his statement, Das urged banks to prioritize collecting household deposits and reducing reliance on wholesale resources for lending. "Banks are facing challenges in funding their loans with bank deposits, leading to dependency on short-term non-retail deposits and other liability instruments to meet increasing demand. This trend could expose the banking system to structural issues. Therefore, banks should concentrate on collecting household financial savings through innovative products and services," stated Das.
Thursday's policy announcement marked the 50th meeting of the MPC since its establishment in September 2016. "The framework has effectively maintained macroeconomic stability even during challenging periods. The growth remains robust, and inflation is following a downward trajectory," noted Das. He also highlighted the positive near-term outlook for global growth, while acknowledging long-term challenges posed by demographic shifts, climate change, geopolitical tensions, rising public debt, and the emergence of new technologies such as artificial intelligence.
On the domestic front, the governor reported the expected progress of the monsoon, strong expansion of services, a resurgence in rural demand, and stable discretionary spending in urban areas, all of which support household consumption.
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