RBI Governor Shaktikanta Das Announce Monetary Policy: Repo Rate Unchanged at 6.5%

RBI Governor Shaktikanta Das Announce Monetary Policy: Repo Rate Unchanged at 6.5%

In a crucial announcement on Tuesday, Reserve Bank of India (RBI) Governor Shaktikanta Das revealed that the Monetary Policy Committee (MPC) has decided to keep the policy repo rate steady at 6.5 per cent. This decision comes as retail inflation continues to hover above the central bank's target of 4 per cent, amid ongoing economic uncertainties both domestically and globally.

Decision Details

The MPC's decision was made by a majority, with four out of six members voting to maintain the current repo rate. As a result:

- The Standing Deposit Facility (SDF) rate remains at 6.25 per cent.

- The Marginal Standing Facility (MSF) rate and the bank rate are steady at 6.75 per cent.

Governor's Emphasis on Balanced Monetary Policy

Governor Das, in his post-policy press conference, underscored the importance of a balanced approach in monetary policy. He reiterated the MPC's commitment to gradually withdrawing accommodation to ensure that inflation aligns with the targeted range while continuing to support economic growth.

"Monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4 per cent on a durable basis to sustain price stability as the outset strong foundation," stated Governor Das.

Revised Growth Projections

The RBI has revised its growth projections for the current financial year 2024-25, forecasting a GDP growth rate of 7.2 per cent. The quarterly growth projections are as follows:

- Q1: 7.3 per cent

- Q2: 7.2 per cent

- Q3: 7.3 per cent

- Q4: 7.2 per cent

Governor Das noted that the risks to the growth outlook are evenly balanced, signaling a cautious optimism about India's economic trajectory.

Balancing Inflation and Economic Recovery

The decision to keep the repo rate unchanged reflects the RBI's cautious approach towards balancing the dual objectives of controlling inflation and supporting economic recovery. The global economic landscape is currently characterized by uncertainties stemming from geopolitical tensions and the lingering effects of the COVID-19 pandemic.

Relevant Laws and Regulations

Several laws and regulations are pertinent to this announcement:

1. Reserve Bank of India Act, 1934: This act governs the functioning of the RBI and grants it the authority to regulate the issuance of banknotes and the keeping of reserves to ensure monetary stability in India.

2. Monetary Policy Framework Agreement (2016): An agreement between the Government of India and the RBI that sets the inflation target and governs the formulation and implementation of monetary policy.

3. Inflation Targeting Framework: Under the RBI Act, 1934, and the Monetary Policy Framework Agreement, the RBI is mandated to maintain a certain level of inflation, currently targeted at 4% with a margin of 2% on either side.

Market and Economic Context

This monetary policy decision comes at a time when the global economy faces significant uncertainties. Rising geopolitical tensions, fluctuating oil prices, and the lingering impacts of the COVID-19 pandemic continue to influence economic dynamics worldwide.