RBI MPC FY25: Repo rate kept unchanged at 6.5% for seventh consecutive time

This report has been updated

The Reserve Bank of India's Monetary Policy Committee (RBI MPC) has decided to keep the repo rate unchanged at 6.5 per cent for the seventh consecutive time, Governor Shaktikanta Das announced on Friday. He said a majority of 5-1 took the decision.

The RBI MPC has also decided to keep its stance of "withdrawal of accommodation" unchanged with a majority of 5-1. RBI Governor Das said this was to ensure that inflation aligned with the four per cent target while aligning with growth.
 

To understand "withdrawal of accomodation", watch this video published by Business Standard in June, 2023

 

What the Business Standard poll predicted

Earlier this week, a Business Standard poll predicted that the repo rate would be kept unchanged. The repo rate was last changed in February 2023, when it was hiked from 6.25 per cent to 6.5 per cent. Between May 2022 and February 2023, the repo rate was raised by 250 basis points (bps).

Additionally, Das said that the Standing Deposit Facility (SDF) will remain at 6.25 per cent. The marginal standing facility (MSF) and bank rate will also remain at 6.75 per cent.

Here is what the RBI governor said about inflation

Shaktikanta Das kept the retail inflation forecast for 2024-25 (FY25) unchanged but tweaked the quarter-wise figures.

In Q1, the retail inflation is now likely to be 4.9 per cent as compared to 5 per cent earlier. In Q2, the inflation is likely to be 3.8 per cent as compared to 4 per cent earlier.

For Q3FY25, the inflation forecast has been kept unchanged at 4.6 per cent. But for Q4FY25, the inflation forecast has been lowered to 4.5 per cent as compared to 4.7 per cent earlier.

The RBI governor said that core inflation had declined steadily, owing to which MPC must be "actively disinflationary". He added that the global economy has remained resilient and global trade is expected to grow faster in 2024, however, weaker than its historical average.

While inflation is moving closer to targets, the RBI governor said the last mile is turning out to be challenging. He added that uncertainties in food prices continue to pose challenges, as well as tight global labour markets.

Here's what RBI MPC said on GDP growth

For FY25, the Gross Domestic Product (GDP) growth prediction has been kept unchanged at 7 per cent.

However, here too, changes have been made to quarter-wise predictions.

In Q1FY25 GDP growth target has been set at 7.1 per cent as compared to 7.2 per cent earlier.

For Q2FY25, GDP growth target has been fixed at 6.9 per cent  from 6.8 per cent earlier.

For Q3 and Q4, the GDP growth has been predicted at 7 per cent each. For Q4FY25, the GDP growth target was 6.9 per cent earlier.


READ: RBI Governor Shaktikanta Das' full speech here