RBI keeps repo rate unchanged at 6.5%; lowers inflation estimate to 5.1% in FY24

The Reserve Bank of India (RBI) maintained the policy repo rate at 6.5%. The RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged.

The standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.

The central bank has cut the inflation aim to 5.1% from the 5.2% forecast in the April policy.

The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.  As these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The RBI has maintained its GDP growth projection for the fiscal year 2023-24 at 6.5%.

The MPC, with a majority of five out of six members, remains focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, RBI Governor Das said.

The central bank has lowered the inflation projection to 5.1% during FY24 from an earlier estimate of 5.2%. Despite this slight decrease, the Governor emphasized that headline inflation is above the RBI's target of 4% and is expected to remain so for the rest of the year.

Further, the government has mandated the RBI to ensure CPI inflation at 4% with a margin of 2% on either side.

The next meeting of the MPC is scheduled during August 8-10, 2023.

Source: Media reports