RBI Keeps Repo Rate Unchanged at 6.5% Amid Inflation Concerns

The Reserve Bank of India's Monetary Policy Committee (MPC) has opted to maintain the policy repo rate at 6.5 per cent due to persistent retail inflation exceeding the 4 per cent target.

Governor Shaktikanta Das remarked, "It was decided by a majority of 5:1 to keep the interest rate unchanged at 6.50 per cent." This marks the seventh consecutive meeting where the MPC has chosen to maintain the status quo on the repo rate, which is the rate at which banks borrow funds from the RBI to address short-term liquidity mismatches.

Das further stated, "The tight demand-supply situation in certain categories of pulses and the production outcome of key vegetables want close monitoring especially in the background of the forecast of above normal temperature in the coming months." The MPC has also upheld the stance of 'withdrawal of accommodation' as highlighted in its last review held in February 2024.

Regarding the economic outlook, Governor Das expressed optimism, noting, "Going forward, the outlook for agriculture and rural activity appears bright." He emphasized the potential for strengthening rural demand and improving employment conditions to bolster private consumption.

Furthermore, the India Meteorological Department's forecast of above-normal temperatures during April-June raises concerns about potential increases in prices of vegetables, fruits, and other perishable items. Das urged for careful monitoring of the situation, particularly in light of the tight demand-supply dynamics in certain agricultural categories.

The MPC, constituted under the Reserve Bank of India Act, 1934, comprises six members, including three appointed by the Central government. The recent three-day review meeting of the MPC, which commenced on April 2, concluded today. Governor Das also highlighted that growth has continued to sustain momentum, surpassing projections, with headline inflation easing to 5.1 per cent during both January and February.

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