The Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Thursday that the central bank’s Monetary Policy Committee (MPC) has chosen to maintain the key repo rate at 6.5 percent. This decision marks the sixth consecutive instance where the MPC has opted to keep interest rates unchanged.
RBI Governor Das explained the decision, stating, ‘After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the Monetary Policy Committee decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5 percent.’ He further outlined that the standing deposit facility (SDF) rate remains at 6.25 percent, while the marginal standing facility (MSF) rate and the bank rate stand at 6.75 percent.
Emphasizing the central bank’s commitment to managing inflation while supporting growth, Das highlighted factors such as robust domestic economic activity, rising headline inflation, and a softening trend in commodity prices. He projected inflation for the next financial year to be at 4.5 percent, with specific quarters expected to see rates of 5 percent in Q1, 4 percent in Q2, 4.6 percent in Q3, and 4.7 percent in Q4.
Looking ahead, the RBI foresees the Indian economy maintaining a GDP growth rate of 7 percent in FY25.
Mukesh Kochar, National Head of Wealth at AUM Capital, commented on the MPC outcome, stating, ‘The decision is on expected lines. RBI’s focus remains on aligning inflation towards its target of 4 percent, expected to be attained by the June-August quarter.’ Kochar further suggested the possibility of a rate cut towards the end of the 2nd or 3rd quarter, as inflation expectations for Q4 and Q1 have been reduced. He also noted the persistence of tight liquidity in the banking system, attributing it to the focus on curbing inflation.
Concerns regarding increased global public debt were also raised, underlining its significance in the current economic landscape.
