RBI keeps repo rate unchanged at 6.5 pc, FY25 GDP growth seen at 7 pc

Insight Online News

Mumbai, April 5 : As widely expected by markets and policy-watchers, the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) on Friday yet again decided to keep the policy repo rate unchanged at 6.50%.

Repo rate refers to the interest rate at which the RBI lends to commercial banks. A high repo rate means cost of borrowing for banks going up and as a result leads to rise in loan EMIs.

With the central bank holding the key interest rate, EMIs for housing, car, business and other loans would not rise.

“The Monetary Policy Committee (MPC) met on 3rd, 4th and 5th April, 2024. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC decided by a majority of 5 to 1 to keep the policy repo rate unchanged at 6.50%. Consequently, the standing deposit facility (SDF) rate remains at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%,” RBI Governor Shaktikanta Das said.

The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

Stating the rationale of the MPC decision, RBI Governor said that since the last (monetary) policy the growth-inflation dynamics have played out favourably.

He said that economic growth has continued to sustain its momentum surpassing all projections. Further, he said that headline inflation has eased.

Das noted that core inflation has also declined steadily over the past nine months to its lowest level in the series.

“The fuel component of CPI (consumer price index) remained in deflation for six consecutive months. Food inflation pressures, however, accentuated in February,” he said.

He said that as the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risks to inflation.

“The MPC will remain resolute in its commitment to aligning inflation to the target,” Governor Das said.

The central bank is tasked to maintain price stability in the country and maintain retail inflation at 4% with a margin of 2% on either side.

The RBI has projected GDP growth in the current financial year 2024-25 at 7%. It expects the retail inflation for the current year at 4.5%.

The RBI Governor said that geo-political tensions pose risk to growth outlook.

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