RBI keeps repo rate unchanged at 6.5%, takes neutral stance: Shaktikanta Das

The Reserve Bank of India (RBI) has pegged the repo rate unchanged at 6.5 per cent. Governor Shaktikanta Das said while announcing the monetary policy statement on Wednesday that the decision was taken with 5:1 majority.

The MPC decided to change the stance of the monetary policy to neutral from withdrawal of accommodation. “After evaluating the macroeconomic conditions and future outlook, the Monetary Policy Committee (MPC) decided, with 5 out of 6 members in agreement, to maintain the policy rate at 6.5 per cent,” the RBI boss said. 

This implies that the central bank has the flexibility to adjust interest rates based on the direction of inflation. The Reserve Bank of India also kept the SDF, MSF and bank rates unchanged at 6.25 per cent and 6.75 per cent respectively.

The reverse repo rate stands at 3.35 per cent. Das added that the MPC also decided to remain focused on a durable alignment of inflation within the +/-4 per cent target. 

The central bank said that inflation for the fiscal’s third quarter will rise to 4.8 per cent and will fall to 4.2 per cent in Q4FY25. Retail inflation for FY25 was pegged at 4.5 per cent assuming normal monsoon. Das said that retail inflation is likely to see a rise in September due to rise in food prices and unfavourable base. 

For Q1FY26, the RBI pegged the inflation at 4.3 per cent, slightly above the 4 per cent. The RBI has been mandated by the Government of India to maintain inflation levels at 4 per cent. 

Moreover, the central bank maintained FY25 growth estimates at 7.2 per cent. RBI’s GDP growth estimates for Q2FY25 stood at 7 per cent, Q3FY25 at 7.4 per cent, Q4FY25 at 7.4 per cent, and Q1FY26 at 7.3 per cent. This is the 10th time in a row that the central bank has kept the repo rate unchanged. 

The Monetary Policy Committee (MPC) meeting was held on October 7-9, 2024. This was the first MPC meeting after three new external members were appointed by the government.

Notably, this is the first meeting of the six-member RBI MPC after half the members were changed last week.

Earlier in October, the Centre appointed three new members to the RBI’s monetary policy panel. These three external members of the six-member panel are routinely nominated and appointed by the central government.

The new members are Saugata Bhattacharya, economist; Dr Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development; and Professor Ram Singh, Director, Delhi School of Economics, University of Delhi. They join RBI Governor and MPC Chairperson Das, Rajiv Ranjan, serving as Executive Director, and Michael Debabrata Patra, as the Deputy Governor.

Bhattacharya, Kumar, and Singh, replace Shashanka Bhide, Ashima Goyal, and Jayanth R Varma as the external members.

With Thanks Reference to:https://www.businesstoday.in/latest/economy/story/rbi-keeps-repo-rate-unchanged-at-65-takes-neutral-stance-shaktikanta-das-449297-2024-10-09 and https://www.livemint.com/economy/rbi-mpc-keeps-repo-rate-unchanged-6-5-percent-changes-stance-neutral-monetary-policy-committee-meeting-shaktikanta-das-11728436507901.html