RBI Governor Shaktikanta Das announces monetary policy, repo rate unchanged at 6.5 pc

Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy Statement, Mumbai (Pic/PTI)

RBI Governor Shaktikanta Das announced the second bi-monthly monetary policy for the financial year 2024-25 at 10 am on Friday.

This marks the RBI's first policy announcement since the results of the Lok Sabha elections 2024.

The RBI has decided to keep the policy rate unchanged for the eighth time in a row, saying it will maintain a tight vigil on inflation.

The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.

The Monetary Policy Committee (MPC), chaired by Governor Das, has been convening in Mumbai this week to deliberate on key policy decisions amidst a challenging economic landscape.

Announcing the second bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.

RBI Governor Das said, "The MPC met on the 5th, 6th and 7th June 2024. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, it decided by a 4 to 2 majority to keep the policy repo rate unchanged at 6.50 per cent."

He said MPC will remain watchful of elevated food inflation amid the expectation of a normal monsoon.

The RBI raised the growth projection to 7.2 per cent from an earlier estimate of 7 per cent for the current financial year.

The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.

According to the reports from ANI, the central bank's stance on the benchmark interest rate has garnered significant attention, particularly given the persistent inflationary pressures, especially in the food sector.

The RBI's repo rate, since its last increase in February 2023 is currently held at 6.50 per cent. It is widely anticipated to remain unchanged for the eighth consecutive bi-monthly policy review.

M Govinda Rao former director of the National Institute of Public Finance and Policy and member of the Fourteenth Finance Commission told ANI, "It is widely expected that the MPC will hold the policy rate in the eighth consecutive meeting."

"The inflation rate, particularly the food inflation continues to be much higher than the target rate of 4 per cent," he added.

Food inflation has been a persistent concern, with rural areas experiencing a 0.59 per cent rise and urban areas seeing a 1.03 per cent increase in April, leading to a combined national food inflation increase of 0.74 per cent.

This trend underscores the challenges faced by the central bank in maintaining price stability.

The agricultural industry is optimistic in spite of these inflationary pressures. In the upcoming months, the forecast of an above-average monsoon and expected improvements in agricultural production may serve to reduce food inflation.

"Looking ahead, the forecast of above normal south-west monsoon by the India Meteorological Department (IMD) is expected to boost kharif production and replenish the reservoir levels," Das said according to a statement released by RBI on Friday.

Addressing global growth and inflation in the statement, RBI governor Das said, "Global growth is sustaining its momentum in 2024 and is likely to remain resilient, supported by a rebound in global trade."

"Inflation is easing, but the final leg of this disinflation journey may be tough," he added.

(With inputs from ANI and PTI)