Reserve Bank of India holds repo rate at 6.50% for eighth consecutive meeting

The Reserve Bank of India's Monetary Policy Committee on 7 June 2024 kept the policy repo rate unchanged at 6.50% for the eighth consecutive meeting. The decision was taken by a four-to-two majority.

The standing deposit facility rate remained at 6.25%, and the marginal standing facility rate and the bank rate at 6.75%.

TWO MEMBERS VOTE FOR A CUT

Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Governor Shaktikanta Das voted to keep the rate unchanged, while Ashima Goyal and Jayanth R. Varma voted for a 25 basis point reduction. By the same four-to-two majority, the committee decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Goyal and Varma voted for a change in stance to neutral.

GROWTH FORECAST RAISED TO 7.2%

The RBI raised its projection for real GDP growth in 2024-25 to 7.2%, from 7.0% previously, with growth projected at 7.3% in the first quarter, 7.2% in the second, 7.3% in the third and 7.2% in the fourth. Governor Das said that if the projection materialises, it would be the fourth consecutive year of growth at or above 7%.

The committee said headline inflation had moderated since February 2024, easing from 5.1% to 4.8% in April, while core inflation fell to 3.2% in April, the lowest in the current CPI series. It said food inflation remained elevated and that adverse climate events created considerable uncertainty for the food inflation trajectory, while volatility in crude oil prices and financial markets posed upside risks.

The central bank kept its CPI inflation projection for 2024-25 at 4.5%, with quarterly estimates of 4.9%, 3.8%, 4.6% and 4.5%. The next meeting of the MPC is scheduled for 6 to 8 August 2024.