The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has once again decided to maintain the repo rate at 6.5 per cent, marking the ninth consecutive policy review where the rate has remained unchanged. This decision was made with a majority vote of 4-2. The RBI MPC continues its stance of “withdrawal of accommodation.”
RBI Governor Shaktikanta Das, in his Monetary Policy statement, highlighted that “Headline inflation, which had been steady at 4.8 per cent, rose to 5.1 per cent in June. The anticipated moderation in inflation in Q2 of the current financial year due to base effects is expected to reverse in the third quarter. Ensuring price stability is a key factor in achieving sustained growth. The growth forecast for the current financial year remains steady at 7.2 per cent. However, the forecast for the first quarter was slightly adjusted to 7.1 per cent from the previous projection of 7.3 per cent. The growth for the first quarter of the next financial year is projected at 7.2 per cent.
The domestic rate-setting panel has projected inflation at 4.5 per cent for the current financial year, consistent with the previous projection. On a quarterly basis, the inflation forecast was revised to 4.4 per cent for Q2, 4.7 per cent for Q3, and 4.3 per cent for Q4, against the previous projections of 3.8 per cent for Q2, 4.6 per cent for Q3, and 4.5 per cent for Q4. Inflation for the first quarter of the next financial year is projected at 4.4 per cent. The Governor emphasized that food inflation, which accounts for 46 per cent of headline inflation, cannot be overlooked. He noted that high food prices likely continued into July, leading to the revision in the inflation forecast for the second quarter of the current financial year.”
