RBI MPC meeting: Why repo rate was kept unchanged at 6.5% – RBI governor Shaktikanta Das explains | India Business News

Feb 8, 2024

RBI MPC meeting: The Reserve Bank of India (RBI) kept the key policy rate – the repo rate – unchanged at 6.5% after the Monetary Policy Committee (MPC) meeting. RBI Governor Shaktikanta Das It was noted that GDP growth Despite global uncertainties, the Indian economy remains strong. However, he pointed to the time inflation Coming down, it is still not close to RBI's comfortable level of 4%.
“Monetary policy should continue to be actively disinflationary to bring inflation down to the 4 per cent target on a sustainable basis. The MPC will remain firm on this commitment. The MPC also decided to focus on housing recovery to ensure full transmission and stabilization of inflation expectations, Shaktikanta Das said in his monetary policy statement.

Why was the decision taken to keep the repo rate unchanged in the RBI MPC meeting?

  1. The MPC said domestic economic activity is doing well and is expected to be supported by pick-up in investment demand, optimistic business sentiments and rising consumer confidence.
  2. On the inflation front, large and frequent food price shocks are disrupting the disinflation momentum that is being driven by the decline in core inflation.
  3. Geopolitical events and their impact on supply chains, and volatility in international financial markets and commodity prices are major sources of inflation risk.
  4. cumulative effect of policy repo rate Growth is still working its way into the economy. The MPC will carefully monitor any signs of normalization of food price pressures on non-food prices, which could spoil the gains in the reduction in core inflation.
  5. Since there is a need to maintain the path of disinflation, the MPC in this meeting decided to keep the policy repo rate unchanged at 6.50 per cent.

“Monetary policy should continue to be actively disinflationary to ensure full transmission of inflation expectations. The statement said that the MPC will remain firm in its commitment to keep inflation in line with the target.
“The global economy continues to present a mixed picture. On the one hand, inflation approaching target and better-than-expected growth in major advanced and emerging market economies have raised the possibility of a soft landing. On the other hand, with ongoing wars and conflicts and the emergence of new flashpoints in different parts of the world, the disruption in the Red Sea is the latest in a series, providing uncertainty to the global macroeconomic outlook. Shaktikanta Das said.

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