RBI Credit Policy: Repo rate unchanged at 6.5% for 8th time in a row

RBI Monetary Policy Meet June 2024: In its first credit policy meeting after the Lok Sabha election results were announced, the Reserve Bank of India Monetary Policy Committee has kept the repo rate unchanged at 6.5% for the eighth time in a row.

The MPC has also maintained the withdrawal of accommodation stance which means the RBI has decided to reduce the money supply in the system to rein in inflation.

Repo rate unchanged

The RBI had increased the repo rate in the last quarter of FY23 by 25 basis points under the liquidity adjustment facility. Since then the interest rate has been kept unchanged. The RBI has also maintained the SDF rate at 6.25% and MSF rate at 6.75%.

Meanwhile, SBI in its research analysis suggested that the RBI's initial rate reduction is anticipated in Q3FY25. It expects the ensuing rate cut cycle to be modest in scale, aimed at bolstering liquidity.

Economic Projections

GDP growth for 2024-25 has been projected at 7.2%. RBI projects Q1 at 7.3%, Q2 at 7.2%, Q3 at 7.3%, Q4 at 7.2% with risk even balanced. The CPI inflation for the same period is projected at 4.5%, assuming normal monsoon. RBI projects retail inflation in Q1 of FY25 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%.

RBI governor Shaktikantha Das also expressed concerns over elevated inflation while assuring that RBI remains committed for aligning inflation to 4% on a durable basis

For the final quarter of FY24, GDP has grown 7.8%. For the full year of FY24, GDP has been pegged at a strong 8.2% as compared to a growth rate of 7% in FY2022-23.

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