NEWS – According to recent update , RBI has kept policy rates unchanged

HIGHLIGHTS

• Maintaining Repo Rate and Policy Stance
  • The repo rate, which is the main policy rate, remains unchanged at 6.5%, and the policy stance continues to be one of ‘withdrawal of accommodation.’
  • This decision was made by a majority 5:1 voting among the six-member MPC, chaired by RBI Governor Shaktikanta Das.
• Reasons for Unchanged Rates
  • The overall economic outlook is positive, despite challenges in specific sectors.
  • While there has been a general moderation in inflation, food inflation remains a concern, keeping headline numbers elevated.
  • However, core inflation (excluding food and fuel) remains benign, indicating that strong economic growth has not led to widespread inflationary pressures.
• Vigilance on Inflation
  • RBI Governor Shaktikanta Das highlighted that uncertainties in food prices continue to pose challenges.
  • The MPC remains vigilant about potential upside risks to inflation, which could disrupt the disinflationary trend.
• Expectations of Inflation Moderation
  • The RBI expects headline inflation to moderate in the coming months, supported by a favorable base effect until July 2024.
  • Additionally, the arrival of rabi harvests and expectations of a normal monsoon will alleviate pressure on food prices.
• Cautious Approach
  • Given the uncertainties surrounding food inflation, the RBI prefers a cautious approach.
  • The central bank aims to align inflation towards the target while supporting economic growth, as outlined in the March monetary policy bulletin.
• Growth Outlook
  • The RBI has retained the GDP growth forecast at 7% for fiscal 2024-25, indicating confidence in economic expansion.
  • The resilience in the domestic economy is supported by robust growth in the manufacturing sector and steady investment trends.
• Inflation Projection
  • RBI projects retail inflation at 4.5% for fiscal 2024-25, with expectations of moderation in different quarters.
  • The central bank remains watchful of international and domestic food prices, climate-related risks, and global commodity price trends.
• Impact on Interest Rates
  • Interest rates on loans linked to the repo rate are expected to remain stable, providing relief to borrowers.
  • Deposit rates, however, may see upward pressure in certain segments due to competition for funds.