BY A R DAS
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday kept the repo rate unchanged at 6.5 per cent for the ninth straight meeting, with a majority of 4-2. The MPC decided to keep its stance of “withdrawal of accommodation” unchanged.
The RBI decided to keep the policy repo rate unchanged at 6.50 per cent for the ninth time in a row. Consequently, the standing deposit facility (SDF) rate remains at 6.25 percent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
The Monetary Policy Committee, MPC, also decided by a majority of 4 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of plus or minus two percent, while supporting growth.
The MPC met on 6th, 7th and 8th August. The next meeting is scheduled for October 7 to 9, 2024.
The MPC projected the inflation at 4.5 per cent for FY25 same as the previous projection. On a quarterly basis, the inflation forecast was revised to Q2 at 4.4 per cent, Q3 at 4.7 per cent, and Q4 at 4.3 per cent, against the previous projections of Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.
The inflation for the first quarter of the next financial year was projected at 4.4 per cent.
Das said that food inflation, which has a weight of 46 per cent in the headline inflation, cannot be ignored.
High food prices likely continued in July, reflected in the revision in the inflation forecast for the second quarter of the current financial year.
As many as 10 respondents in a ‘Business Standard’ poll expected the MPC to maintain a status quo. The MPC last changed rates in February 2023, when the policy rate was raised to 6.50 per cent. The annual retail inflation rate rose for the first time in five months in June, climbing above 5 per cent on the back of a jump in food prices.