RBI Keeps Repo Rate Steady At 6.5%; Maintains GDP Growth Forecast

The Reserve Bank of India’s Monetary Policy Committee (MPC) announced on Wednesday that it will keep the repo rate unchanged at 6.5%, while also holding firm on its forecast for India’s real GDP growth at 7.2% for FY25.

During the MPC briefing, RBI Governor Shaktikanta Das indicated that inflation is likely to see a moderate uptick, with projections for the third quarter (Q3) of this fiscal year set at 4.8%.

He cautioned that the decline in inflation will likely be gradual and uneven, stating, “The inflation horse has been brought to the stable within the tolerance band. We have to be careful about opening the gate.”

Despite the recent 50 basis point rate cut by the US Federal Reserve, the RBI opted to maintain its current stance, shifting from a withdrawal of accommodation approach to a neutral position.

Das noted the resilience of the Indian rupee, describing it as among the least volatile currencies.

Additionally, he also urged banks and non-banking financial companies (NBFCs) to pay close attention to inoperative accounts, mule accounts, and the evolving cybersecurity landscape.

Market experts expressed approval of the RBI’s decision to keep the repo rate steady, emphasizing the importance of prioritizing domestic inflation and financial stability amid rising individual savings risks.

Geopolitical Tensions Drive Oil Prices, Influencing MPC’s Rate Decision

Suresh Darak, Founder of Bondbazaar, noted that geopolitical tensions have contributed to soaring oil prices, likely influencing the MPC’s decision to hold rates steady.

He stated, “Recent global geopolitical developments have led to a surge in oil prices, which could drive inflation further.”

In recent weeks, yields on the 10-year benchmark government securities have increased by approximately 10 basis points, reflecting these external pressures.

Meanwhile, analysts believe that if current global challenges subside, the RBI may consider a rate cut in the next policy cycle.

The central bank’s cautious approach indicates a focus on maintaining economic stability as it navigates these complexities.

Also Read: RBI Projects Robust GDP Growth For FY25 Over Strong Economic Fundamentals