When we speak of RBI Monetary Policy, the central bank's six-member committee voted 4:2 to retain the benchmark repo rate at 6.5 percent for the eighth straight session. The MPC also resolved to maintain its policy of 'removal of accommodation'.  In his monetary policy statement, RBI Governor Shaktikanta Das said that inflation is falling and economic growth is strengthening, although food inflation remains a worry.

Here are five major takeaways from the RBI MPC outcome:

Status Quo on Rates and Stance

After a thorough examination of the changing macroeconomic and financial circumstances as well as the forecast, the RBI MPC maintained its benchmark policy rates and stance. The policy repo rate stays at 6.50 percent, the standing deposit facility (SDF) rate at 6.25 percent, and the marginal standing facility (MSF) and bank rate at 6.75 percent. The MPC voted to continue focusing on the "withdrawal of accommodation" with a majority of four out of six members. 

Inflation Prediction

Governor Das stated that CPI headline inflation fell further in March-April, although persistent food inflation overshadowed the benefits from disinflation in the core and fuel groups.  "Core inflation has slowed for the 11th straight month since June 2023. "Services inflation has moderated to a historic low, while goods inflation has remained contained," Das added.

Food inflation pressures may be reduced by the prospect of an above-normal monsoon, which speaks favorably for the kharif season.  Assuming a typical monsoon, Governor Das forecasts CPI inflation for FY25 at 4.5 percent, with Q1 at 4.9 percent, Q2 at 3.8 percent, Q3 at 4.6 percent, and Q4 at 4.5 percent.

Growth Projection was Changed

The RBI revised its FY25 GDP growth prediction to 7.2 percent from 7% before. In determining the direction of action  Das stated that while the RBI monitors the influence of monetary policy in advanced economies, the central bank would focus on local growth-inflation circumstances and the future. 

"Some believe that the Reserve Bank's monetary policy is driven by the 'follow the Fed' philosophy. While we keep an eye on whether clouds are forming or clearing on the far horizon, we play the game based on the local weather and pitch conditions. In other words, while we assess the impact of advanced nations' monetary policy on Indian markets, our decisions are mostly influenced by local growth-inflation dynamics and the forecast," Das stated.