RBI policy: Central bank keeps rates unchanged for the sixth straight time

The Reserve Bank of India on Thursday kept its key policy rate unchanged at 6.5 percent in its Monetary Policy Committee (MPC) meeting

On Thursday, the Reserve Bank of India kept its key policy rate unchanged at 6.5 per cent in its Monetary Policy Committee (MPC) meeting on February 8. This is the sixth consecutive time the central bank has maintained a status quo.

“Uncertainty in food prices continues to impinge on headline inflation. Momentum in domestic activities continues to be strong,” the governor said in the briefing.

Monetary policy must continue to be actively dis-inflationary, Das added. Five out of six members voted in favour of the rate decision.

“Global growth is expected to remain steady in 2024, with heterogeneity across regions. Though global trade momentum remains weak, it exhibits signs of recovery and is likely to grow faster in 2024. Inflation has softened considerably and is expected to moderate further in 2024,” the central bank governor said.

In its last Monetary Policy Committee (MPC) meeting on December 8, the central bank kept the repo rate unchanged for the fifth time in a row. Governor Shaktikanta Das had raised the growth projection to 7 per cent for the current financial year from 6.5 per cent earlier.

The monetary policy committee is entrusted with the responsibility of deciding the policy repo rate to achieve the inflation target, keeping in mind the objective of growth

The retail inflation in the current financial year has declined after touching a peak of 7.44 per cent in July 2023, it is still high and was 5.69 per cent in December 2023, though within the Reserve Bank’s comfort zone of 4-6 per cent

What the RBI governor said last time

Last month, the RBI governor said that the Indian economy should record a growth rate of 7 per cent in the next financial year and inflation is likely to ease further.

Das had also credited the Centre for structural reforms it undertook in recent years, saying they have boosted the medium and long-term growth prospects of the Indian economy.

“Chances of soft landing have improved and markets have reacted positively. However, geopolitical risks and climate risks remain matters of concern,” the governor had remarked.

During her interim budget address to parliament, Finance Minister Nirmala Sitharaman said that India would reduce its budget gap sharply in fiscal year 2024-25 and focus on infrastructure and long-term reforms to drive growth.

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