RBI keeps interest rate unchanged at 6.5 per cent for sixth consecutive time

The Reserve Bank of India RBI on Thursday decided to keep policy rate unchanged for the sixth time in a row in view of global uncertainty and the need to bring down retail inflation to 4 per centFollowing RBIs decision to maintain status quo banks and financial institutions will largely keep lending rates stableRBI had last raised repo rate in February 2023 to 65 per cent after six consecutive rate hikes aggregating to 250 basis points since May 2022Announcing the decision of the Monetary Policy Committee MPC RBI Governor Shaktikanta Das on Thursday said it has decided to keep the policy repo rate unchanged on the basis of an assessment of the current and evolving macroeconomic situationMPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth he saidThese decisions are in consonance with the objective of achieving the mediumterm target for Consumer Price Index CPI inflation of 4 per cent within a band of 2 per cent while supporting growthFor 202425 RBI has projected a growth rate of 7 per cent and retail inflation at 45 per cent with risks evenly balancedThe real GDP growth for the next financial year is projected at 7 per cent with Q1 growth at 72 per cent Q2 at 68 per cent Q3 at 7 per cent and Q4 at 69 per centAs per the National Statistical Office NSO the country is expected to record a growth rate of 73 per cent in the current financial year ending March 2024Domestic economic activity is strengthening As per the first advance estimates released by the NSO real Gross Domestic Product GDP is expected to grow by 73 per cent yearonyear yoy in 202324 underpinned by strong investment activity Das saidOn the supply side he said that Gross Value Added GVA expanded by 69 per cent in 202324 with manufacturing and services sectors as the key driversTalking about headwinds he said geopolitical tensions volatility in international financial markets and geoeconomic fragmentation pose risks to the growth outlookReferring to retail inflation Das said that CPI inflation is projected at 54 per cent for 202324 with Q4 inflation at 5 per centAssuming a normal monsoon next year CPI inflation for 202425 is projected at 45 per cent with Q1 at 5 per cent Q2 at 4 per cent Q3 at 46 per cent and Q4 at 47 per cent The risks are evenly balanced he saidThe MPC noted that domestic economic activity is holding up well and is expected to be backed by the momentum in investment demand optimistic business sentiments and rising consumer confidenceOn the inflation front large and repetitive food price shocks are interrupting the pace of disinflation that is led by the moderation of core inflationHowever geopolitical events and their impact on supply chains and volatility in international financial markets and commodity prices are key sources of upside risks to inflationThe cumulative effect of policy repo rate increases is still working its way through the economy The MPC will carefully monitor any signs of generalisation of food price pressures to nonfood prices which can fritter away the gains in the easing of core inflation he saidMonetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission he said adding MPC will remain resolute in its commitment to aligning inflation to the target of 4 per centMPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth he addedThis is the first bimonthly policy following presentation of Interim Budget 202425 last weekIn December CPI inflation stood at 569 per centThe government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either sideThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever