RBI Repo Rate Announcement:
The Reserve Bank of India (RBI) Governor, Shaktikanta Das, unveiled the decision of the Monetary Policy Committee (MPC) regarding interest rates following a two-day review meeting. This committee, known as the rate-setting panel, commenced its session on April 3 and concluded its discussions on April 5. In its first announcement for the Financial Year 2024-25 (FY25), the RBI governor opted to maintain the repo rate at its current level of 6.5 percent. The repo rate signifies the rate at which the central bank lends money to commercial banks for short-term purposes.
RBI Governor's Remarks on Repo Rate:
Governor Das underscored the MPC's vigilance towards food inflation. He highlighted that the six-member rate-setting panel had favored maintaining the status quo on interest rates by a majority vote of 5:1. Additionally, the committee remains focused on withdrawing the accommodative stance, indicative of a cautious approach to monetary policy adjustments.
RBI Governor's Statement on GDP Growth:
In his address, the RBI governor conveyed that there would be no alterations to the GDP growth forecast for FY25. The estimate for GDP growth stands firm at 7 percent for the ongoing fiscal year, signaling confidence in the economy's trajectory.
RBI Governor's Perspective on Inflation:
Regarding inflation, the RBI MPC projects it to hover around 4.5 percent for FY25. Governor Das emphasized that inflation is on a declining trajectory, while GDP growth continues to exhibit robustness. He stressed the importance of maintaining vigilance and reiterated the need to ensure that inflation aligns durably with the targeted levels. With rural demand gaining momentum, consumption is anticipated to bolster growth in FY25. The RBI has outlined a retail inflation forecast of 4.5 percent for the fiscal year 2024-25, with projections of 4.9 percent in Q1, 3.8 percent in Q2, 4.6 percent in Q3, and 4.5 percent in Q4 of FY25.
Insights from RBI's February MPC:
In its previous review held in February 2024, the RBI opted to maintain the status quo on policy rates and stances. However, the decision was not unanimous, as one member recommended a rate cut of 25 basis points. This divergence in opinion underscores the nuanced approach to monetary policy decisions within the MPC.
The RBI's decision to keep the repo rate unchanged reflects a cautious stance amidst evolving economic dynamics. Governor Das's remarks underscore the committee's commitment to maintaining price stability while supporting sustainable economic growth.
As the fiscal year progresses, continued vigilance and flexibility in monetary policy will be crucial in navigating the economic landscape effectively.