Governor Shaktikanta Das announced on Thursday that the benchmark lending rate at the Reserve Bank of India has been unanimously decided to remain at 6.5 per cent. A meeting was conducted today between the monetary policy committee (MPC) of the Reserve Bank of India where the outcome was decided. According to Das, five of the MPC’s six members voted in favour of keeping the emphasis on the removal of accommodation in order to ensure that inflation gradually converges with the target while fostering growth.
As a result, the marginal standing facility and bank rates remain at 6.75%, while the Standing Deposit Facility (SDF) rate stays at 6.25%. Sakshi Gupta, Principal Economist, HDFC Bank said that in addition to not making any changes in the policy rate, the RBI emphasized on the need to maintain tight monetary conditions to anchor inflation at 4% throughout the year. Simultaneously, it remained cautious about future inflationary risks. As anticipated, the growth commentary was positive, and the RBI maintained its FY24 projection of 6.5%. Since there is currently little chance of any rate cuts in FY24, the central bank may decide to keep rates unchanged throughout the year.
Retail inflation fell to an 18-month low of 4.7% in April, setting the stage for the MPC meeting. On June 6, 7, and 8, the six-member MPC met under the direction of RBI Governor Das. The MPC maintained the benchmark interest rates at 6.5% in April, citing declining retail inflation and the need to accelerate economic growth. The RBI has been instructed by the government to maintain CPI inflation at 4% with a 2% tolerance on either side.
In an earlier attempt to control inflation, the RBI raised the repo rate by a total of 250 basis points since May 2022. The central bank’s decision to maintain current interest rates is being aided by declining inflation and a strong economic recovery, but the impact of a slowdown in global growth on the domestic economy will be a major concern.
The MPC prefers to remain in wait-and-watch mode to assess the impact of weather conditions on the price trend before considering a pivot to easing, so economists anticipated that the stance would be maintained this month.
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