RBI Maintains Repo Rate At 6.5 pc, Balances Inflation Control And Economic Growth

New Delhi, Dec 6 (KNN) In a decisive monetary policy meeting held from December 4 to 6, the Reserve Bank of India's Monetary Policy Committee (RBI MPC) voted 4:2 to maintain the repo rate at 6.5 per cent, marking the 11th consecutive time the rate has remained unchanged since February 2023. 

RBI Governor Shaktikanta Das announced the committee's decision, emphasising a strategic approach to managing economic challenges.

The central bank remains committed to its primary objective of achieving price stability while supporting economic growth. 

"MPC believes that only with durable price stability can we secure a strong foundation for high growth," Das stated, underlining the delicate balance between controlling inflation and promoting economic expansion.

Alongside the repo rate decision, the standing deposit facility (SDF) rate will continue at 6.25 per cent, with the marginal standing facility (MSF) rate and bank rate remaining at 6.75 per cent. 

The MPC has also maintained its 'neutral' stance, with a majority of four members voting to preserve the current monetary policy approach.

The RBI has revised its growth projections for the financial year 2024-25 (FY25), lowering the real gross domestic product (GDP) growth forecast to 6.6 per cent, down from the previous projection of 7.2 per cent. 

This downward revision reflects the challenging economic landscape, with specific quarterly projections indicating potential variability in economic performance.

Inflation remains a critical concern for the central bank. The consumer price index (CPI)-based inflation for FY25 has been revised upward to 4.8 per cent from the earlier estimate of 4.5 per cent. 

The elevated inflation is primarily driven by high food prices and geopolitical disruptions affecting global supply chains. In October, inflation reached a 14-month high of 6.21 per cent, with food prices playing a significant role.

Governor Das noted that while fuel growth has been in deflation for the 14th consecutive month, food prices are expected to keep headline inflation elevated in the October-December quarter. 

The RBI anticipates that a good rabi season could provide relief, particularly for rice and tur dal prices.

The economic slowdown is evident in the GDP growth for the second quarter of FY25, which decelerated to 5.4 per cent—the lowest in two years and significantly below the RBI's projection of 7 per cent. 

This decline is attributed to weak performance in manufacturing and mining sectors.

Manufacturing and service firms surveyed by the Reserve Bank indicate a potential firming up of input costs and selling prices in the January-March quarter, suggesting ongoing economic challenges and the need for continued careful monetary management.

(KNN Bureau)