RBI Keeps Repo Rate Unchanged At 6.25 Per Cent

The Reserve Bank of India (RBI) on Tuesday kept the repo rate unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent, RBI Governor Shaktikanta Das said.

The Monetary Policy Committee (MPC) met on August 8, 9, and 10, 2023 and after detailed deliberation on all relevant aspects, it decided unanimously to keep the policy repo rate unchanged.

The MPC also decided by a majority of five out of six members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July-August led by vegetable prices. While the vegetable price shock may reverse quickly, possible El Niño weather conditions along with global food prices need to be watched closely against the backdrop of a skewed south-west monsoon so far.

Addressing a press conference, Das said that the Indian economy is exuding enhanced strength and stability despite the massive shocks to global economy in recent years.

“Our economy has continued to grow at a reasonable pace, becoming the fifth largest economy in the world and contributing around 15 per cent to global growth. We have also made significant progress towards controlling inflation. Our banks remain healthiest in more than a decade with historically high levels of capital, declining levels of non-performing assets and rising profitability,” he said.

The RBI has projected India’s real GDP growth for Q2 at 6.5 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent. Real GDP growth for Q1 in 2024-25 is projected at 6.6 per cent. The risks are evenly balanced.

According to the RBI, vegetable prices may see a significant correction after a few months. The prospects of kharif crops have brightened following the improvement in the progress of the monsoon.

Uncertainties, however, remain on domestic food price outlook due to sudden weather events and possible El Niño conditions in August and beyond. Global food prices are also exhibiting a hardening bias on renewed geopolitical tensions. Crude oil prices have firmed up in recent weeks and its outlook is clouded by demand-supply uncertainties.