RBI Monetary Policy: Repo Rate Steady at 6.5%, FY24 Inflation Forecast Unchanged at 5.4%

Overview: RBI holds repo rate steady at 6.5%

The Reserve Bank of India (RBI) has maintained its stance on key policy rates in its latest Monetary Policy Committee (MPC) meeting, opting to keep the repo rate steady at 6.5%. The decision comes amidst a backdrop of economic considerations and inflationary pressures. Here are the key highlights from the RBI's recent announcement:

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1. Steady Repo Rate:

The RBI has chosen to keep the repo rate unchanged at 6.5%, aligning with market expectations. Five out of six members of the MPC voted in favor of this decision.

2- Focus on Withdrawal of Accommodation:

The MPC, with a majority vote, emphasized the importance of gradually withdrawing accommodation to ensure that inflation progressively aligns with the target while supporting growth. RBI Governor Shaktikanta Das stressed the need for an actively disinflationary monetary policy stance.

3- Continuity in Policy:

This marks the sixth consecutive policy review where the repo rate remains unchanged, following the Interim Budget announcement on February 1, 2024.

4- Key Rates Snapshot:

Alongside the repo rate, other key rates such as the Fixed Reverse Repo Rate, bank rate, marginal standing facility (MSF) rate, and standing deposit facility rate also remain unchanged at their respective levels.

5. Inflation Targeting:

The RBI remains steadfast in its commitment to containing inflation at the target rate of 4%.

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6. Inflation Projections:

The RBI has maintained its inflation projection for the fiscal year 2023–2024 at 5.4%, indicating stability in expectations.

7. Revised Inflation Forecast:

The CPI inflation forecast for Q4FY24 has been revised downwards to 5.0% from 5.2%, suggesting a slight moderation in inflationary pressures.

8. Inflation Outlook for FY24-25:

Looking ahead, CPI inflation is anticipated to be 4.5% for the fiscal year 2024–2025, with quarterly projections indicating a relatively stable trajectory.

9. Economic Momentum:

The RBI Governor expressed optimism regarding the momentum in economic activity, forecasting a GDP growth rate of 7% for the fiscal year 2024-25.

10. Revised GDP Forecasts:

GDP growth forecasts for various quarters of FY25 have been revised upwards, reflecting a positive outlook on economic performance.

Overall, the RBI's decision to maintain the status quo on key policy rates underscores its commitment to balancing inflation concerns with the imperative of supporting economic growth in the current macroeconomic landscape.

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