RBI keeps the repo rate unchanged at 6.5%

Mumbai: The Reserve Bank of India (RBI) has kept unchanged the interest rate at 6.5 percent, after hiking the rates by 250 basis points since May last year.

The decision was announced by Shaktikanta Das, Governor of RBI in the first bi-monthly Monetary Policy Committee (MPC) meeting of the financial year 2024.

Governor Shaktikanta Das said the central bank's policy stance remains focused on "withdrawal of accommodation", signalling it could consider further rate hikes if necessary. The pause in rate hikes is "for this meeting only", Shaktikanta Das said.

"If I have to characterise today's monetary policy in just one line…it's a pause, not a pivot," he said in a press conference after the announcement of the policy review.

Real Gross Domestic Product (GDP) growth for 2023-24 is projected at 6.5% with 1st Quarter (Q1) at 7.8%, Q2 at 6.2%, Q3 at 6.1% and Q4 at 5.9%, the RBI governor stated, adding that economic activity remains resilient and headline Inflation is projected to moderate in Financial Year (FY) 2023-24).

Retail inflation was up 6.44 per cent year-on-year in February, declining from 6.52 per cent in January but has stubbornly remained above the RBI's mandated target range of 2 per cent-6 per cent. In a tightening cycle, a premature pause in monetary policy action would be a costly policy error, Governor Shaktikanta Das had said earlier.

The governor had also stated that in a world of high uncertainty, giving out explicit forward guidance on the future path of monetary policy would be counterproductive.

The RBI Governor said, "We are living in volatile times. Oil prices is another evidence of this volatility. Overall outlook remains dynamic and fast evolving. Our monetary policy in recent period has aimed for non disruptive normalisation from pandemic era stimulus measures. Even as monetary policy moved decisively to withdrawal of accomodation, financial conditions evolved in line with productive requirements of the economy. Growth has since then become broad based, inflation has softened from its elevated levels a year ago, however it still remains above the tolerance band. Projections point to a softening inflation, though disinflation is likely to be gradual and protracted given rigidity of core and underlying inflation pressures. At this stage we remain watchful of the evolving outlook and impact of our action in past one year."

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