5 Key takeaways from the RBI policy meet
2 min read • Updated: February 8, 2024, 11:51 AM
The Indian central bank kept the key rates unchanged for the sixth consecutive time. The RBI also believes that the inflation rate will continue to ease in FY25, assuming a normal monsoon.
The Indian central bank kept the key rates unchanged for the sixth consecutive time. It has left the repo rate unchanged since February 2023 as price rise woes have eased. Inflation has since stayed around in the range of 2% to 6%.
1. Maintains status quo
The RBI kept the key policy rate unchanged at 6.5% for the sixth consecutive time. It also said that it remains focused on withdrawal of accommodation to ensure that the inflation rate aligns to its target of 4%.
2. GDP Growth
The Indian central bank raised its FY24 GDP growth estimate for the Indian economy to 7.3% from 7%. Also, it expects the Indian economy to grow at 7% in FY25. Robust household consumption, upturn in private capex, improved business sentiments, healthy balance sheets of banks and government’s capex push to be among key demand drivers.
3. Inflation to moderate
It highlighted that core inflation (CPI inflation excluding food and fuel) softened to a four-year low of 3.8 per cent in December. The RBI expects the inflation rate to ease to 4.5% in FY25. The headline inflation rate is estimated to be at 5% in FY24.
4. Focus on food inflation
Going forward, the RBI expects the food inflation to shape the inflation trajectory. It pointed out that rabi sowing has surpassed last year’s level. “Yet considerable uncertainty prevails on the food price outlook from the possibility of adverse weather events,” said the RBI policy statement. It added that effective supply side responses may keep food price pressures under check. On the other hand, crude oil prices remain volatile, the policy statement noted.
5. Managing liquidity
The Indian central bank says that it will continue to remain nimble and swift in response to evolving conditions in the financial markets. It added that the transmission of a 250 basis point rate hike is still underway.