The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5% in its August 2024 policy review, citing inflation concerns and global economic uncertainty.
RBI Governor Shaktikanta Das announced the decision, stating that the MPC aims to balance inflation control with economic growth support. The committee also decided to maintain the status quo on the reverse repo rate, keeping it at 3.35%.
The decision comes as a surprise to some experts, who had predicted a rate hike to combat rising inflation. However, the RBI has taken a cautious approach, considering the global economic slowdown and its potential impact on India's growth.
The RBI has also revised its inflation forecast for 2024-25 to 5.2% from 5.0% earlier, citing increased food and fuel prices. The central bank aims to keep inflation within its target range of 4% (+/- 2%).
The MPC's decision will have implications for borrowers, as unchanged repo rates mean that interest rates on loans will remain steady. However, some experts predict that banks may still increase lending rates due to rising credit demand.
The RBI has also announced measures to support economic growth, including an increase in the limit for foreign portfolio investment in debt markets and relaxation of norms for external commercial borrowings.
The MPC's next meeting is scheduled for October 2024, where it will review the economic situation and make further decisions on monetary policy.
In a press conference, RBI Governor Shaktikanta Das stated that the MPC is committed to supporting economic growth while keeping inflation under control. He also emphasized the need for fiscal discipline and structural reforms to support sustainable growth.
The RBI's decision has received mixed reactions from experts and industry leaders. Some have praised the cautious approach, while others have criticized the lack of action on inflation.
As the Indian economy navigates global headwinds and domestic challenges, the RBI's monetary policy decisions will be crucial in shaping the growth trajectory.