RBI maintains repo rate at 6.5% for 10th consecutive time
What's the story
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has voted to keep the repo rate unchanged at 6.5% for the 10th consecutive time.
The decision was taken with a majority vote of 5:1 during the committee's meeting today.
Significantly, the MPC shifted its policy stance from "withdrawal of accommodation" to "neutral."
This indicates a shift in focus toward maintaining a balance between controlling inflation and supporting economic growth.
Policy shift
RBI's neutral stance indicates balanced policy priority
The RBI MPC's move to a 'neutral' stance means that the central bank could either cut or hike the interest rate in the future.
The shift indicates an equal policy focus on controlling inflation and boosting economic growth.
The committee has continued to focus on meeting inflation targets while supporting growth, as part of this new approach.
Governor's remarks
RBI Governor Das comments on flexible inflation targeting
RBI Governor Shaktikanta Das, announcing the latest bi-monthly monetary policy statement, said, "Flexible inflation targeting has served us well."
He also hinted that food inflation pressures may ease later in the fiscal year.
The central bank is required to maintain retail inflation at 4% (with a flexibility of 2% up or down).
Rate stability
RBI keeps SDF, MSF, and bank rates unchanged
The RBI MPC has also decided to keep the Standing Deposit Facility (SDF) rate unchanged at 6.25% and the Marginal Standing Facility (MSF) and Bank Rates at 6.75%.
The SDF is the lower band of the interest rate corridor while the MSF is its upper band.
The reverse repo rate also remains unchanged at 3.35%.
Economic forecast
RBI maintains FY25 GDP and inflation projections
The RBI has kept its GDP growth estimate for FY25 unchanged at 7.2%.
However, it has revised quarterly estimates with Q2FY25 GDP growth forecast cut to 7% from 7.2%.
Forecasts for Q3FY25, Q4FY25, and Q1FY26 have been increased to 7.4%, 7.4%, and 7.3%, respectively, from their previous estimates of 7.3%, 7.2%, and 7.2%.
The inflation projection for FY25 remains unchanged at 4.5%.