RBI retains repo rate at 6.5% for 10th consecutive time

The Reserve Bank of India’s Monetary Policy Committee (MPC) in its latest review meeting on October 9 has opted to keep the repo rate unchanged at 6.5 per cent, for the 10th consecutive time. The MPC also unanimously agreed to change its stand from Accommodative to Neutral, in a bid to balance inflation control with the need to support economic growth, announced the RBI governor Shaktikanta Das.

Inflation apart, India’s central bank also took into account ongoing geopolitical unrest and global economic uncertainties while retaining the repo rate, or the key rate at which the RBI lends to other banks.

The MPC has also decided to keep the Standing Deposit Facility (SDF) Rate unchanged at 6.25 per cent, while retaining the Marginal Standing Facility (MSF) Rate and the Bank Rate at 6.75 per cent.

Among other decisions, the MPC retained its real Gross Domestic Product (GDP) forecast of 7.2 per cent for the fiscal year 2024-’25 (FY25). The RBI’s projected growth rates now stand at: 7 per cent for the second quarter (down from 7.2 per cent), 7.4 per cent for the third quarter (up from 7.3 per cent) and 7.4 per cent for the final quarter of FY25. For the first quarter of FY26, the RBI’s growth rate is 7.3 per cent.

The decision on the various rates, according to Das, was “in consonance with the objective of achieving the medium term target for Consumer Price Index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth”. The RBI governor added the MPC was of the opinion that currently it would “be appropriate to have greater flexibility and optionality to act in sync with the evolving conditions and the outlook”.

The inflation forecast of the RBI stays unchanged for FY25 at 4.5 per cent. Better prospects for kharif and rabi crops and ample buffer stocks of foodgrains ensured there is now greater confidence on the disinflation path later in the financial year, Das pointed out.