Finance
RBI Monetary Policy Meeting June 2024: The Reserve Bank of India’s Monetary Policy Committee (MPC), which had kickstarted its meeting on Wednesday, has kept the repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. The MPC convened for the first time following the announcement of the Lok Sabha election results.
This is the second meeting of the RBI MPC after the new financial year FY2025 started from April 1 and the third meeting of 2024 after the February Policy meeting held between February 6-8. The Monetary Policy Committee invariably meets for 3 days before announcing its decision at the end of the 3-day period. The next RBI MPC meeting is scheduled on August 6. The MPC is required to meet at least four times in a year.
Governor of the Reserve Bank of India Shaktikanta Das updated the GDP (gross domestic growth) forecast for FY 25 to 7.2% at a news conference, up from the previous estimate of 7%.
The increase in GDP prediction was well received by the stock market, as the Sensex surged by about 1%, or more than 700 points, to the 75,814 level shortly after the policy was announced.
The RBI is required by the government to maintain CPI inflation at 4% with a 2% margin of error.
The Central Bank made the decision in April to continue its monetary policy of “withdrawal of accommodation” and to retain the repo rate at 6.5%. Six members of the MPC, led by Das, voted 5 to 1 in favor of both decisions.
All external benchmark lending rates that are tied to the repo rate will remain unchanged as a result of the RBI maintaining the repo rate, which will relieve borrowers by preventing an increase in their equivalent monthly instalments (EMIs).
On the other hand, lenders have the right to increase interest rates on loans connected to the marginal cost of fund-based lending rate, where the full transmission of a 250 bps hike in the repo rate between May 2022 and February 2023 has not happened.
On why the rates were kept unchanged, RBI Governor Shaktikanta Das, in April, had said that as the uncertainties in food prices continue to pose challenges, the MPC remained vigilant to the upside risks to inflation that might derail the path of disinflation. “Two years ago, around this time, when CPI inflation had peaked at 7.8 per cent in April 2022, the elephant in the room was inflation. The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis,” the Governor had added.
Source:IE
