Despite concerns about rising food prices, swings in crude oil expenditure, and the likelihood of domestic economic expansion adding to inflationary pressures, the Reserve Bank of India has decided to keep its inflation projection for the current fiscal year at 5.4 percent.

The central bank has also opted to leave the policy rate steady for the fifth time in a row in order to keep a close eye on inflation. "While headline inflation has slowed from last year's highs, it remains above target in many countries," said Reserve Bank of India Governor Shaktikanta Das. On Friday, Das announced the findings of the six-member Monetary Policy Committee (MPC) for the impending bi-monthly monetary policy. On Wednesday, the RBI's group began its three-day deliberation.

The Monetary Policy Committee (MPC) unanimously voted to keep the repo rate at 6.5 percent unchanged. Furthermore, real GDP is expected to be 7% in 2023-24. "We don't wait for the house to catch fire before acting," Das said of banks and NBFCs' proactive measures. "In light of the evolving growth-inflation trade-off, the MPC made the correct decision in maintaining rates," said Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings.

CPI and Repo Rate

The repurchase rate, or repo rate, is the interest rate at which a central bank (such as the Reserve Bank of India) loans money to commercial banks in exchange for government assets. It is an important technique used by central banks to control the money supply and manage inflation.

When the central bank reduces the repo rate, commercial banks can borrow at a lower cost, encouraging them to borrow more. higher borrowing capability frequently leads to higher lending to consumers and enterprises, hence encouraging economic activity. Raising the repo rate, on the other hand, makes borrowing more expensive, which can assist to control inflation but may hamper economic growth.

The Consumer Price Index (CPI) is a statistic used to assess the average change in prices paid by urban consumers for a market basket of consumer goods and services across time. CPI inflation essentially indicates price changes for a variety of everyday commodities such as food, housing, clothing, transportation, and so on. It's an important metric for tracking changes in the cost of living and understanding inflationary patterns that affect consumers.