The Reserve Bank of India's (RBI) Monetary Policy Committee unanimously decided to keep the repo rate- key lending rate- unchanged at 6.5 per cent for the fourth time in a row.
"The MPC noted that the moderation in CPI headline inflation reflected the combined and continuing impact of monetary policy tightening, supply augmenting measures and the fuller impact of the previous rate hikes which should keep inflationary pressures contained in the coming months," said RBI governor Shaktikanta Das, on Friday, while explaining the rationale behind the decisions taken by the MPC in its bi-monthly meet.
The MPC decided by a majority of 5-1 to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
The GDP growth forecast for FY24 was retained at 6.5 per cent with Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent, with risks evenly balanced. The MPC's forecast for real GDP growth Q1 FY25 stood at 6.6 per cent.
On inflation front, the central bank left its forecast for this fiscal year unchanged at 5.4 per cent, despite uneven monsoon showers and as outlook on food prices remain on edge amid a spike in global crude oil prices. The central bank now sees inflation for Q2, Q3 and Q4 at 6.4 per cent, 5.6 per cent and 5.2 per cent, respectively. In August policy, the central bank had forecast Q2 inflation at 6.2 per cent, Q3 at 5.7 per cent and Q4 at 5.2 per cent. The RBI had then pegged the inflation rate for the first quarter of the next fiscal year at 5.2 per cent.
The decisions are in line with expectations of analysts and experts. The MPC has been adopting a cautious approach, choosing to observe and assess the consequences of the cumulative 250 basis points hike since May 2022 before making any substantial decisions.
An ET poll of 12 market experts had also indicated that the MPC will keep the repo rate unchanged at 6.5 per cent while maintaining its stance of withdrawal of accommodation.
"Steady interest rates with no change in stance was widely expected and par for the course. Despite the second quarter bulge in inflation, the RBI kept its inflation forecast for the current fiscal unchanged at 5.4 per cent," said CRISIL's Dharmakirti Joshi.
Kotak Mahindra's Nilesh Shah called the policy a "Kapil Dev policy." He said, "The RBI Governor mentioned that the pitch is turning and we will play the ball on merit. Today's policy is like Kapil Dev Policy. It will manage liquidity, inflation, growth, rupee and financial sector stability in an appropriate equilibrium like a legendary all-rounder Kapil Dev managed bowling, batting, fielding and captainship. The RBI has worked hard to create a balance between growth and inflation setting an exam ..
RBI governor Das had expressed confidence that inflation will start to moderate from September onwards. Inflation print for August moderated to 6.83 per cent, after reaching a 15-month high of 7.44 per cent in July, breaching the upper limit of the RBI's tolerance range of 2-6 per cent.
The RBI had commenced its three-day October meeting amid a challenging global economic landscape. The situation has been made even more complicated by the United States, where treasury yields have soared to a 16-year high. Despite this, the US Federal Reserve has made it clear that it will not back down ..
Source Name : Economic Times