By a vote of 4 to 2, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided on Thursday to maintain the repo rate at 6.5% for the ninth consecutive meeting. The MPC made the decision to stick to its "withdrawal of accommodation" position.
According to Reuters, four of the six MPC members supported the rate decision. After staying constant at 4.8%, headline inflation increased to 5.1% in June. It is anticipated that base effects will cause the inflation that moderated in Q2 of the current fiscal year to reverse in the third quarter. Maintaining price stability ultimately results in long-term growth, according to RBI Governor Shaktikanta Das in his declaration of monetary policy,
The announcement stated that the forecast for India's economic growth in FY25, which is 7.2%, is unchanged. Nevertheless, the initial prediction of 7.3 percent for the first quarter was dropped to 7.1 percent. The growth estimate was changed by the MPC from 7% to 2.2% at its previous meeting. The forecast growth rate for the first quarter of the upcoming fiscal year was 7.2%.
The MPC maintained its prior forecast of 4.5 percent inflation for FY25. In contrast to the earlier estimates of Q2 at 3.8 percent, Q3 at 4.6 percent, and Q4 at 4.3 percent, the quarterly inflation forecast was amended to Q2 at 4.4 percent, Q3 at 4.7 percent, and Q4 at 4.3 percent. Forecasted inflation for the first quarter of the following fiscal year was 4.4%.
Das stated that it is impossible to overlook food inflation, which accounts for 46% of headline inflation. The change in the inflation estimate for the second quarter of the current fiscal year most likely reflects the continuation of high food prices in July.
In a poll carried out by a credible source, up to ten participants said they thought the MPC would keep things as they were. The policy rate was increased to 6.50 percent in February 2023, the last time the MPC modified rates. Due to an increase in food costs, the annual retail inflation rate increased in June for the first time in five months, rising beyond 5%.
