In the first meeting of the rate-setting panel of the financial year 2024-25, the Central Bank of India Governor Shaktikanta Das made an important announcement. In the first monetary policy of the fiscal year, the Reserve Bank of India (RBI) decided to keep the key policy repo rate unchanged. This announcement was made in a two-day review meeting of the RBI’s Monetary Policy Committee (MPC). This move was already expected and now the RBI Governor Shaktikanta Das stamped it in the review meeting. It is worth noting that the year’s first meeting started on Wednesday, April 3 and wrapped on Friday, April 5.
The Decision Of RBI On Repo Rate
The decision of the RBI regarding the Repo Rate was already assumed and now the stamped decision has come forward. It is the straight 7th time that the RBI has kept the key policy repo rate unchanged at 6.5%. The six-member rate-setting panel directed by Governor Das observed the impact of global headwinds on economic determinants such as the inflation trajectory and the GDP growth of India. As per RBI Governor Das, the decision was taken after the majority of five members at the bi-monthly MPC meeting.
Due to the decision to keep the repo rate unchanged just like the previous seven times, there will be no change in loan interest rates and it will remain unchanged. The RBI Governor also included that inflation is moving closer to targets. He further added that the core inflation has reduced steadily over the last 9 months while the fuel component remained in deflation for the last 6 months.
Mr Das said, “As the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risk to inflation that may derail the path of disinflation.” However, the outlook for rural and agricultural activity looks to be bright. He believes that global trade will hold the pace and grow faster in the fiscal year 2024-25. He further added that the global economy remained resilient.
The RBI Governor said, “Services inflation remains sticky in advanced economies. Equity markets have gained while yields and dollars remained volatile.” He included in his statement that the liquidity situation of India showed growth in March and it improved whereas the average borrowings under the marginal standing facility, which permits commercial banks to borrow funds, are moderate.
Also Read :- Repo Rate to Remain the Same: A Comprehensive Analysis of MPC’s Strategy
What Is Repo Rate?
The repo rate is the interest rate at which the central bank of any country (including RBI) lends money to commercial banks of the nation in the event of any shortfall of funds. It is used by monetary authorities to manage inflation. When inflation surges, the central banks of a country raise the repo rate as this acts as a deterrent for commercial banks to borrow money from the central bank. This finally reduces the money supply in the economy and controls inflation.
Key Highlights Of RBI MPC Meeting
The RBI has maintained its inflation projection at 5.4% for 2023-24.
MPC decided to remain focused on the withdrawal of accommodation to make sure the inflation progressively aligns with the target while supporting growth.
Furthermore, in the new financial year of 2024-25, CPI inflation is assumed to be 4.5% with quarter 1 at 5%, Q2 at 4%, Q3 at 4.6%, and Q4 at 4.7%.