RBI maintains repo rate at 6.5%, FY24 GDP forecast unchanged
What's the story
The Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Friday that the central bank's Monetary Policy Committee (MPC) has decided unanimously to keep the key repo rate steady at 6.5%, in line with economists' predictions.
This marks the fourth time that the six-member MPC has decided to keep the key interest rates unchanged.
"MPC voted unanimously to leave the repo rate unchanged at 6.5%," RBI Governor Shaktikanta Das said while announcing MPC's decision.
Details
The SDF and MSF rates too remain unchanged
Along with the repo rate, the MPC also chose to maintain the Standing Deposit Facility (SDF) rate at 6.25% and the Marginal Standing Facility (MSF) rate at 6.75%.
Economists widely anticipated this decision in the wake of easing inflation. However, concerns remain about rising global crude oil prices, potential US rate hikes, and a general global slowdown.
The FY24 GDP forecast also remains unchanged at 6.5%.
What Next?
CPI inflation falls but remains above the target
The bi-monthly monetary policy primarily focused on addressing inflation.
In August, the Consumer Price Index (CPI) inflation in India fell to 6.83% as vegetable prices dropped compared to July.
Despite this, it remains above the RBI's tolerance range of 2-6%.
At 6.83%, the retail inflation was 61 basis points lower than July's 15-month high of 7.44%.
This marks the 47th consecutive month that CPI inflation has exceeded the central bank's medium-term target of 4%.
Insights
The RBI continues its ongoing battle against inflation
To combat inflation, the RBI has kept rates stable and liquidity tight.
Inflation negatively affects poor households as their purchasing power decreases while income levels stay the same.
Since May 2022, the MPC has increased rates by 250 basis points but has not altered rates since February's review.
The current situation is unlikely to impact consumers or cause immediate changes in lending and deposit rates.
Facts
The next RBI policy meeting is scheduled for December
The next RBI policy meeting is scheduled for December 6-8.
Maintaining the status quo on the repo rate is not likely to have a significant impact on consumers.
Bankers suggest that keeping the rate unchanged is unlikely to result in immediate adjustments to lending and deposit rates. However, banks will wait for more information before making a decision.