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The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced that the monetary policy committee (MPC) has decided unanimously to keep the policy repo rate unchanged at 6.50 per cent.
While announcing the policy, Das said, “After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, RBI’s Monetary Policy Committee decided unanimously to keep the Policy Repo Rate unchanged at 6.5 per cent.”
“Macroeconomic stability and inclusive growth are the fundamental principles underlying our country’s progress. The policy mix that we have pursued during recent years of multiple and unparalleled shocks has fostered macroeconomic and financial stability,” Das said.
He added, “The twin balance sheet stress that was encountered a decade ago has now been replaced by a twin balance sheet advantage with healthier balance sheets of both banks and corporates.”
This is the fourth time that the MPC has decided to keep the benchmark repo rate unchanged. Before this, the committee has raised the repo rate by 250 basis points since May last year till April 2023.
Das said that the central bank’s committee, with a majority of 5:1, has decided to retain its withdrawal of accommodation stance to ensure that the retail inflation remains within the target of 4 per cent.
The RBI has been mandated by the central government to ensure the consumer price index (CPI)-based inflation remains at 4 per cent, with a margin of 2 per cent on either side.
India’s retail inflation in August eased to 6.83 per cent from a 15-month high of 7.44 per cent in July. However, the consumer price index continues to remain above the upper limit of RBI’s tolerance band, the fourth time this calendar year, and the seventh such instance since August 2022.
The RBI governor said that the retail inflation in September is likely to ease, however, a fall in kharif sowing may pose a threat to it.
For FY24, RBI has retained CPI-based inflation forecast at 5.4 per cent. While the forecast for Q2FY24 has been raised from 6.2 per cent to 6.4 per cent; For Q3, it has been reduced to 5.6 per cent from 5.7 per cent, and For Q4, the projection has been retained at 5.2 per cent. For Q1FY25, RBI maintained the inflation projection at 5.2 per cent.
The RBI has also retained the real gross domestic product (GDP) forecast for 2023-24 (FY24) at 6.5 per cent, Shaktikanta Das said.
