The Reserve Bank of India (RBI) decided to keep the benchmark repo rate unchanged at 6.5% during its fifth bi-monthly monetary policy meeting for the fiscal year 2024-25. The Monetary Policy Committee (MPC), chaired by RBI Governor Shaktikanta Das, also shifted its policy stance from ‘withdrawal of accommodation’ to ‘neutral’, signaling a balanced approach to managing economic growth and inflation.
The decision to maintain the repo rate at 6.5% marks the eleventh consecutive meeting where the rate has remained unchanged. This continuity reflects the RBI’s commitment to ensuring economic stability amid persistent global uncertainties. Governor Das emphasized that the current rate is conducive to supporting sustainable economic growth while keeping inflation in check.
“The MPC’s decision to hold the repo rate steady is guided by the need to balance the dynamics of growth and inflation. The neutral stance allows us the flexibility to respond to evolving economic conditions effectively,” said Das in his statement.
Inflation has been a focal point of the RBI’s policy considerations. The central bank aims to keep inflation within the target range of 4%, with a tolerance band of +/- 2%. Recent data indicate a moderate decline in inflationary pressures, primarily driven by easing food prices. However, core inflation remains a concern, warranting a cautious approach.
The RBI projects GDP growth for FY25 at 6.3%, supported by robust domestic demand and a recovery in industrial activity. The neutral stance provides the RBI with the leeway to adjust monetary policy as necessary to support this growth trajectory.
Global economic conditions continue to influence the RBI’s policy decisions. The ongoing geopolitical tensions, fluctuating commodity prices, and varying monetary policies of major economies pose significant challenges. The RBI remains vigilant and prepared to take appropriate measures to mitigate any adverse impacts on the Indian economy.
In addition to the repo rate decision, the RBI has several policy tools at its disposal to manage liquidity and ensure financial stability. The central bank continues to monitor the effectiveness of these tools in achieving its macroeconomic objectives.
Looking ahead, the RBI’s neutral stance provides it with the flexibility to navigate the complex economic landscape. The central bank remains committed to its dual mandate of fostering economic growth and maintaining price stability.
The RBI’s decision to maintain the repo rate at 6.5% and adopt a neutral policy stance underscores its cautious yet flexible approach to monetary policy. By balancing the needs of growth and inflation, the RBI aims to support a stable and resilient Indian economy amid global uncertainties.
