RBI Maintains 6.5% Repo Rate for the Sixth Time; FY24 GDP Is Maintained at 7%, Inflation Is Projected at 5.4%
For the sixth consecutive month, the monetary policy committee of the RBI chooses to maintain the repo rate at 6.5%.
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For the sixth consecutive meeting, the monetary policy committee of the RBI voted on Thursday to maintain the repo rate at 6.5%. Out of the total six members, five have voted in favor of the decision. The RBI has not altered its forecast for the FY24 GDP, which stands at 7%. Additionally, it has maintained the 5.4 percent inflation estimate for 2023–2024.
Withdrawal of accommodation" is still the official policy position:
Additionally, the RBI MPC maintained the MSF and Bank Rates at 6.75 percent and the SDF at 6.25 percent. The interest rate corridor's bottom band is known as the SDF and the upper band as the MSF.
"Inflation is on a downward trajectory," RBI Governor Shaktikanta Das stated on Thursday, presenting the sixth and final bi-monthly monetary policy of FY24. Our multifaceted approach to maintaining the stability of the financial system has proven effective.
He claimed that the world picture remains unclear due to continuous wars and new flashpoints like the Red Sea situation, and that monetary policy is still actively working to reduce inflation.
"This is the third successive year of growth above 7%, FY24 momentum is expected to continue in FY25," Das stated in reference to the Indian economy.
Effects of RBI MPC Decision on Home Loan Borrowers and the Housing Market:
The chairman of ANAROCK Group, Anuj Puri, stated: "The RBI once again decided to keep the repo rates unchanged at 6.5 per cent, thus extending the festive bonanza that it gave to the homebuyers in its last two policy announcements. The fundamentals of the Indian economy remain strong despite all global headwinds and inflation well under control." As a result, homeowners continue to benefit from comparatively low interest rates on their home loans.
According to him, the housing industry is unstoppable given current trends, and stable mortgage rates will support the general upturn in consumer confidence. Since the last year, property prices have increased in all seven of the top cities, thus purchasers will definitely benefit from the RBI's reprieve.
Rates Are Held Steady by RBI for Nearly a Year:
The Reserve Bank has maintained the short-term lending rate, sometimes known as the repo rate, at 6.5% for nearly a full year. In order to control inflation, which is mostly driven by changes on a worldwide scale, the benchmark interest rate was last raised in February 2023, from 6.25 percent to 6.5% percent.
Although it is still high and was 5.69 percent in December 2023, retail inflation in the current fiscal year has decreased from its top of 7.44 percent in July 2023. Nevertheless, it is still within the Reserve Bank's comfort zone of 4-6 percent.
The MPC is charged with setting the policy repo rate with the goal of growth in mind in order to meet the inflation target.
The MPC increased the policy rate by 40 basis points during an off-cycle meeting in May 2022. Thereafter, rate hikes of differing magnitudes were implemented in each of the next five sessions until February 2023. Between May 2022 and February 2023, there was a total increase of 250 basis points in the repo rate.
Three individuals from outside the MPC and three RBI officials make up the group.
Jayanth R Varma, Ashima Goyal, and Shashanka Bhide are the panel's external members. In addition to Governor Das, Michael Debabrata Patra, the Deputy Governor, and Rajiv Ranjan, the Executive Director, are the additional RBI representatives in the MPC.
