RBI MPC meeting outcome: Repo rate retained at 6.5%, FY25 GDP growth forecast stays 7%, inflation seen at 4.5%. Details here

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), which met from April 3 to April 5, has decided to keep the repo rate unchanged at 6.5%, RBI Governor Shaktikanta Das said while briefing the press.

The decision was taken in a "ratio of 5:1", Das said, noting that five members of the panel voted in favour of keeping the benchmark rate steady, whereas, one member voted against it. This is similar to the February review meeting, where external member Jayanth Varma was the sole member who voted in favour of cutting the rates.

The repo rate – the rate at which the RBI lends to commercial banks – has remained unchanged for the 7th consecutive time. The last revision was made in February 2023, when the central bank had increased the rates by 25 basis points (bps) as part of its concerted effort to tame inflation.

The Reserve Bank has also retained its growth projection for financial year 2024-25 (FY25) at 7%. The quarter-wise breakdown is as follows:

• Q1 at 7.1%
• Q2 at 6.9%
• Q3 at 7%
• Q4 at 7%

The consumer price index (CPI) inflation forecast has also been retained at 4.5% for FY25. Here's quarter-wise projection:

• Q1: 4.9%
• Q2: 3.8%
• Q3: 4.6%
• Q4: 4.5%

RBI MPC meeting: Here are the key announcements

• The policy repo rate under the liquidity adjustment facility (LAF) is unchanged at 6.50%.
• Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate stays at 6.75%.
• The MPC also decided to retain its stance of "withdrawal of accommodation" to ensure that inflation progressively aligns to the target, while supporting growth.
• The real GDP growth projection for FY25, the RBI said, remains the same at 7%.
• The monetary policy must continue to be “actively disinflationary to ensure anchoring of inflation expectations and fuller transmission," the RBI Governor said.
• The MPC will remain resolute in its commitment to aligning inflation to the target of 4%, Das said, adding that the panel has decided to "remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth".
• Going ahead, food price uncertainties would continue to weigh on the inflation outlook, stated the monetary policy statement issued on the RBI's website. "An expected record rabi wheat production in 2023-24, however, will help contain cereal prices."
• The outlook of agriculture continues to remain "bright", Das said. The strengthening of rural demand, improving employment conditions and informal sector activity, moderating inflationary pressures, and sustained momentum in manufacturing should boost "boost private consumption", he added.
• Various indicators show that urban demand has remained buoyant, and with rural demand catching up, "consumption is expected to support growth in FY25", the RBI Governor pointed out.
• The Indian rupee was amongst the most resilient currencies amid the global headwinds, Das said. He also noted that the financial indicators of Indian banks continued to remain healthy, as per the data available till December 2023.
• On the global economy, Das said the RBI sees it as resilient with a stable outlook. As the central banks navigate the last mile of disinflation, financial markets are responding to changing perceptions on the timing and pace of monetary policy trajectories, the policy statement noted.
• "Equity markets are rallying, while sovereign bond yields and the US dollar are exhibiting bidirectional movements. Gold prices have surged on safe haven demand," the statement added.

With inflation still hovering around the 5% mark – it was 5.1% in February 2024 – which is significantly higher than the RBI’s medium-term target of 4%, the RBI was not expected to initiate the rate cut cycle, economists had said ahead of the policy review meeting. However, rate cuts are on the cards later this year, after the US Federal Reserve begins reducing the benchmark lending rates, analysts had underlined.

Following the RBI Governor's announcements related to the MPC meeting, benchmark Indian indices traded lower as compared to the previous day's close. At 11 a.m., Sensex was down 0.02% at 74,210.34, whereas Nifty50 was trading 0.06% lower at 22,500.