RBI maintains repo rate at 6.5% for tenth consecutive time, takes neutral stance

The Reserve Bank of India (RBI) has decided to maintain the repo rate at 6.5% during its October 2024 Monetary Policy Committee (MPC) meeting, marking the tenth consecutive time this rate has been unchanged. Governor Shaktikanta Das announced the decision, highlighting the need to address inflation concerns while supporting robust domestic growth. The MPC unanimously shifted its policy stance from “withdrawal of accommodation” to “neutral,” allowing for flexibility to adapt to changing economic conditions.

Despite a slight dip in real GDP growth for Q1 FY2025, which stood at 6.7%, the RBI retained its growth forecast for the fiscal year at 7.2%. The central bank projected growth rates of 7% for Q2, 7.4% for Q3, and 7.4% for Q4. Das noted that domestic factors such as private consumption and investment continue to drive economic resilience, providing room for the RBI to focus on aligning inflation with its medium-term target of 4% within a +/- 2% band.

The MPC also kept the standing deposit facility (SDF) rate at 6.25% and the marginal standing facility (MSF) rate at 6.75%. As inflation remains a significant concern, especially with rising food prices and geopolitical risks, the MPC is taking a cautious approach. Inflation for Q3 is expected to rise moderately to 4.8%, with ongoing concerns regarding food prices impacting rural demand.

Recent changes in the MPC include the induction of three new external members: Professor Ram Singh, Saugata Bhattacharya, and Dr. Nagesh Kumar, who replaced Ashima Goyal, Shashanka Bhide, and Jayanth R. Varma.