RBI MPC Keeps Repo Rate Unchanged At 6.50%; Stance Maintained At ‘Withdrawal of Accommodation’

The RBI MPC on Thursday unanimously decided to keep the key repo rate unchanged at 6.50 per cent, in line with market expectations. The monetary policy stance is maintained at ‘Withdrawal of Accommodation’ with the MPC voting in favour of this in the ratio of 5:1.

The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.

Announcing the latest bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Indian economy and the financial sector stand out as resilient, and the headline inflation across countries is showing a downward trend.

He also said financial stability concerns persist in advanced economies and the labour market in many countries remains tight. Q4 GDP growth was aided by fixed investment and higher exports.

On the GDP growth, Das said the economy recorded a growth of 7.2 per cent in 2022-23, which was higher than the 7 per cent estimated earlier. On the FY2023-24 prospects, the RBI governor said domestic demand conditions remain supportive of growth on the back of improving household consumption and investment activity.

He said the real GDP growth for 2023-24 is projected at 6.5 per cent, with Q1 at 8 per cent, Q2 at 6.5 per cent, Q3 at 6 per cent and Q4 at 5.7 per cent, with risks evenly balanced.

On the inflation forecast, Das said the RBI expects CPI inflation for FY24 at 5.1 per cent, against 5.2 per cent earlier.

In the previous monetary policy review in April 2023, the RBI MPC had surprisingly halted the rate hike cycle and kept the key repo unchanged at 6.50 per cent. The decision of the status quo came after continuous hikes since 2022 in order to control inflation, during which the central bank had raised 250 basis points (bps). Inflation was high last year due to the supply chain constraint caused by the Russia-Ukraine war.

According to the latest data available, India’s CPI inflation in April 2023 has declined to its 18-month low of 4.7 per cent. The inflation data for the May 2023 month is slated to be released on June 12.