- The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 6.5%.
- The decision, taken at the MPC’s meeting, marks the eighth time in a row that the policy rate has been put on hold to keep the focus on battling high inflation.
MPC Observations
- According to the MPC, high-frequency indicators of domestic activity are showing resilience in 2024-25.
- The southwest monsoon is expected to be above normal, which augurs well for agriculture and rural demand, but headwinds from geopolitical tensions, volatility in international commodity prices, and geoeconomic fragmentation pose risks to the outlook.
- The MPC has revised its GDP growth forecast upwards from the earlier 7% estimate to 7.2% for the financial year 2024-2025.
- It has also decided to remain focused on the withdrawal of accommodation to ensure that inflation does not accelerate while supporting growth.
- These decisions align to achieve the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.
- Food inflation remains elevated due to the persistence of inflation pressures in vegetables, pulses, cereals, and spices.
MPC Observations
- According to the MPC, high-frequency indicators of domestic activity are showing resilience in 2024-25.
- The southwest monsoon is expected to be above normal, which augurs well for agriculture and rural demand, but headwinds from geopolitical tensions, volatility in international commodity prices, and geoeconomic fragmentation pose risks to the outlook.
Dig Deeper: Read about the difference between policy stances like expansion/accommodation, neutral and calibrated tightening.
