The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has kept the repo rate steady at 6.5% for the ninth consecutive time, maintaining its stance of ‘withdrawal of accommodation.’ This decision, made by a 4:2 vote, underscores the RBI’s focus on balancing inflation control with economic growth. Governor Shaktikanta Das highlighted that resilient GDP growth allows monetary policy to concentrate on managing inflation, projecting retail inflation at 4.5% for FY25, assuming a normal monsoon. The RBI’s growth projection remains unchanged at 7.2% for the current financial year. The MPC remains vigilant about high food inflation, emphasizing the need for banks to mobilize household financial savings and manage structural liquidity issues. However, we believe that the continued high repo rate could stifle borrowing and investment, potentially slowing economic growth in the long run.
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