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The Reserve Bank of India’s Monetary Policy Committee (MPC) has announced its decision to maintain the repo rate at 6.5% in its June 2024 meeting. The RBI Governor, Shaktikanta Das, emphasized the importance of continued vigilance against upside risks to inflation, particularly from food prices, to ensure sustainable disinflation. The current CPI inflation trajectory, with a 4.5% projection for FY25, remains a key factor in the RBI’s decision-making process.
Despite recent global rate cuts, including those by the US Federal Reserve, the RBI has firmly stated its commitment to anchoring inflation expectations and maintaining real interest rates. The goal remains to align inflation to the target of 4.0% on a durable basis, setting the stage for sustained high growth.
Experts suggest that the RBI may embark on a rate cutting cycle later in the year, potentially around October 2024. This move, if implemented, could lead to lower lending rates and reduced EMIs for loan borrowers. The current liquidity trends indicate a deficit, with an average supply of liquidity through repo auctions, highlighting the RBI’s active management strategies.
The RBI’s decision to keep the repo rate unchanged aligns with its efforts to ensure orderly market conditions and financial stability. The outlook for India’s economy remains optimistic, with strong GDP growth projections of 7.2% for FY25. The risks are evenly balanced, and the RBI expects respite from food inflation pressures, especially in cereals and pulses, with the forecast of above-normal monsoon conditions.
As the Indian economy navigates through changing global dynamics, the RBI’s focus on maintaining stability and growth through its monetary policy decisions will play a crucial role in shaping the country’s economic trajectory. The decision to hold the repo rate steady reflects a cautious approach, balancing inflation concerns with the need to support economic momentum in the post-election landscape.