Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said the central bank’s Monetary Policy Committee (MPC) has decided to keep the key repo rate steady at 6.5 percent. The decision is broadly in line with what economists had expected.
The decision to maintain the key repo rate at 6.5 percent marks the sixth time the 6-member Monetary Policy Committee (MPC) has opted to keep the interest rates unchanged.
“After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the Monetary Policy Committee decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5 per cent,” said RBI Governor Das.
He added that the standing deposit facility (SDF) rate stands at 6.25 per cent and the marginal standing facility (MSF) rate and the bank rate stand at 6.75 per cent.
Das said the MPC has also decided to remain focused on “withdrawal of accommodation” to ensure that inflation progressively aligns with the target while supporting growth.
Explaining the rationale behind holding the key rates, the RBI Governor cited strong domestic economic activity, rising headline inflation, and softening in commodity prices.
Das went on to say that the inflation for the next financial year has been projected at 4.5 per cent, with Q1 at 5 per cent, Q2 at 4 per cent, Q3 at 4.6 per cent and Q4 at 4.7 per cent.
Meanwhile, the RBI has projected the Indian economy to maintain a 7 per cent GDP growth rate in FY25.
Mukesh Kochar, National Head of Wealth at AUM Capital, said, “The MPC outcome is on expected lines only. RBI will continue to focus on aligning inflation towards its target of 4 per cent, which is expected to be attained by the June-August quarter.”
“Inflation expectations for Q4 and Q1 have also been reduced. So, the market may discount a rate cut possibility during the end of the 2nd quarter or 3rd quarter. Both the debt market and equity market may discount a rate cut possibility during the end of the 2nd or 3rd quarter. The tight liquidity in the banking system may continue for some more time as the focus is on bringing down inflation. Increased public debt globally has been cited as a concern and it is very important,” he added.