On Friday, December 6, 2024, the RBI Governor Shaktikanta Das announced that the central bank has kept the policy repo rate steady at 6.5%. In his speech, Governor Das highlighted consistent high food inflation is a concern. This has been contributing to the RBI’s cautious outlook on inflation.
With a 4:2 majority of the Monetary Policy Committee (MPC), it has to maintain a neutral monetary stance.
This is for the 11th consecutive time that the repo rate has remained unchanged. The repo rate has been at 6.5% since February 2023. The RBI previously shifted its stance from ‘accommodative’ to ‘neutral’ during the October meeting, while keeping all key rates unchanged.
RBI has kept the other rates steady with Marginal Standing Facility (MSF) rate at 6.75% while Standing Deposit Facility (SDF) rate at 6.25%.
The CRR has been cut by 50 bps to 4%. This is the first CRR cut since March 2020. However, it will be cut in two tranches. It will be cut in 25 basis points each in two fortnights beginning December 14 and December 28.
Despite inflationary pressures, the RBI remains optimistic about India’s growth, supported by good monsoon seasons and increased capital expenditure.
This was Governor Shaktikanta Das’ last MPC meeting before his term ends next week.The MPC convened from December 4-6, 2024 to deliberate on the policy.
The governor has also revised the GDP growth forecast for FY25 from 7.2% to 6.6%
Das said, “It is necessary to monitor incoming data for confirmation on decline in inflation. Prudence and practicality demand that we remain sensitive to dynamically evolving situation.”
The RBI has also revised India’s CPI forecast for FY25 from 4.5% earlier to 4.8%. The move has come after the retail inflation has stood at 6.21% in October 2024, above the RBI’s targeted band of 4%.
In his post policy address, he said that, “The near-term inflation remains elevated on food price pressure and that vegetable prices will see seasonal correction during the winter months.”
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