RBI maintains status quo on key repo rate

Mumbai: The Reserve Bank of India (RBI) on Thursday left its key interest rate unchanged for a second straight policy meeting, but signalled that it wants to see inflation moderate more while preserving the growth momentum.

The monetary policy committee (MPC), which has three members from RBI and an equal number of external experts, voted unanimously to keep the benchmark repurchase, or repo rate unchanged at 6.50 per cent.

It decided 5:1 to retain the policy stance focused on ‘withdrawal of accommodation’, which was introduced in April 2022. While consumer price inflation eased during March-April 2023 and moved into the tolerance band, headline inflation is still above the target of 4 per cent and is expected to remain so during the rest of the current fiscal, RBI Governor Shaktikanta Das said announcing the monetary policy decision.

“Therefore, close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain. Our goal is to achieve the inflation target of four per cent and keeping inflation within the comfort band of 2-6 per cent is not enough.”

The fuller impact of a cumulative 250 basis point increase in repo rate prior to the pause since April, will be evident in the coming months, Das said.

The decision to keep the stance as withdrawal of accommodation was driven by liquidity conditions easing with daily system liquidity averaging at Rs2.3 lakh crore in June. 

Retains GDP growth forecast at 6.5% for FY24

Mumbai: The Reserve Bank of India (RBI) on Thursday retained the GDP growth projection for current fiscal year at 6.5 per cent, on the back of supportive domestic demand conditions.In April, the central bank had marginally revised upwards the 2023-24 GDP growth projection to 6.5 per cent, from its earlier forecast of 6.4 per cent. Weak external demand, geo-economic fragmentation, and protracted geopolitical tensions, however, pose risks to the outlook, it added. “Taking all these factors into consideration, 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,”the RBI said.