RBI maintains status quo, repo rate unchanged

The Reserve Bank of India announced its fourth bi-monthly monetary policy. The central bank decided to keep the repo rate unchanged at 6.50 per cent and stance of ‘withdrawal of accommodation. The RBI governor said, “After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, RBI’s Monetary Policy Committee decided unanimously to keep the Policy Repo Rate unchanged at 6.5 per cent.”

However, the RBI has retained the inflation forecast for 2023-24 at 5.4 per cent, and vowed to take timely measures to prevent any spillovers of global food and fuel price shocks. Stressing that the Reserve Bank has identified high inflation as a major risk to macroeconomic stability and sustainable growth, Governor Shaktikanta Das said the September retail inflation number may be lower than August and July prints.

The headline inflation based on Consumer Price Index moderated to 4.6 per cent in first quarter of 2023-24 as compared to 7.3 per cent in the same period a year ago. RBI has projected the CPI inflation at 5.4 per cent for 2023-24, with Q2 at 6.4 per cent, Q3 at 5.6 per cent and Q4 at 5.2 per cent. The risks are evenly balanced. CPI inflation for the first quarter of 2024-25 is projected at 5.2 per cent.

In August monetary policy too, the inflation for the current fiscal was projected at 5.4 per cent.

Das said while growth remains on track, the declining trend in inflation was interrupted in July-August 2023 due to price shocks in certain food items. Volatile energy and food prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook. “We remain vigilant of the evolving inflation dynamics. I would like to emphatically reiterate that our inflation target is 4 per cent and not 2 to 6 per cent. Our aim is to align inflation to the target on a durable basis, while supporting growth,” the governor said.