The RBI's Monetary Policy Committee has announced its decision to maintain the repo rate at 6.5%, for the seventh consecutive time. This means that for those whose loans are linked to the external benchmark, their EMIs will remain unchanged. The RBI Governor, Shaktikanta Das, has emphasized the importance of continuing to control inflation in order to ensure stable economic growth and has projected an inflation rate of 4.5% for the fiscal year 2025. Economists predict that there may be a series of rate cuts in the near future, possibly beginning in October of 2024, with a potential change in stance.
Headline: Reserve Bank of India Maintains Repo Rate at 6.5%, Focus on Inflation Control
Background:
The Reserve Bank of India (RBI) is the central bank of India responsible for controlling monetary policy. The Monetary Policy Committee (MPC) of the RBI meets every two months to review the country's economic conditions and set the repo rate, which is the rate at which commercial banks borrow from the RBI.
Recent Developments:
In its latest meeting, the MPC decided to keep the repo rate unchanged at 6.5%. This marks the seventh consecutive time the repo rate has remained unchanged. The decision was attributed to concerns over persistent inflation. The RBI Governor, Shaktikanta Das, emphasized the need to prioritize inflation control to ensure stable economic growth.
Inflation Projections:
The RBI has projected an inflation rate of 4.5% for the fiscal year 2025. This is within the RBI's target range of 2% to 6%. However, analysts have noted that inflation remains elevated due to several factors, including supply chain disruptions and rising commodity prices.
Economic Growth Outlook:
Despite the ongoing inflation concerns, the RBI remains optimistic about economic growth. The central bank has projected real GDP growth of 6.4% for the current fiscal year 2022-23. The growth is expected to be driven by strong domestic demand and improved exports.
Future Outlook:
Economists predict that the RBI may consider rate cuts in the near future. The next MPC meeting is scheduled for October 2024. A change in stance from "withdrawal of accommodation" to "neutral" is also possible, indicating a shift towards a more accommodative monetary policy stance.
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