In its latest decision, the Reserve Bank of India (RBI) has opted to keep the repo rate unchanged at 6.5%, marking the seventh consecutive time without any adjustment.
The decision was announced by the Monetary Policy Committee (MPC) on Friday, April 5.
Unwavering Repo Rate Stance
The 6-member MPC, in a majority decision of 5-1, voted to maintain the repo rate at its current level of 6.5%.
Additionally, there has been no alteration in the stance of the Monetary Policy Committee.
This decision aligns with the expectations of economists, who anticipated no change in rates for the first MPC meeting of the new financial year.
Steady Since February 2023
Since its last adjustment in February 2023, when the repo rate was increased to 6.5%, the RBI has refrained from making any further changes.
Despite this, the central bank has maintained a hawkish stance over the past year, emphasizing its commitment to curbing retail inflation and aligning it with the medium target of 4%.
Persistent Inflation Challenges
Retail inflation has persistently remained above the RBI’s medium target of 4% for the 53rd consecutive month.
Although recent months have seen inflation below the 6% threshold set by the RBI, February’s retail inflation rate stood at 5.09%.
This ongoing trend underscores the challenges faced in achieving the desired inflation targets.
Future Outlook
According to a report by SBI Research, retail inflation is anticipated to remain above 5% in March.
However, a gradual decline is expected until July 2024, followed by a projected peak of 5.4% in September, before a subsequent downturn.
The RBI’s decision to maintain the repo rate reflects its cautious approach amidst evolving economic conditions and inflationary pressures.
