RBI Monetary Policy: The rate-setting committee chose to maintain its ‘withdrawal of accommodation’ approach.
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) decided not to raise the repo rate on Thursday. RBI Governor Shaktikanta Das stated at the announcement that the MPC made the decision unanimously.
“The MPC unanimously decided to keep the policy change unchanged at 6.5 percent,” Das added.
“The MPC’s cumulative rate hike of 250 basis points is percolating through the economy, and its full impact should keep inflationary pressures in check in the coming months.” Monetary policy would have to be carefully managed to keep inflation on track with the aim. In light of this, the MPC decided to maintain the policy repo rate at 6.50 percent,” he added.
Das went on to say that the MPC opted to maintain its “withdrawal of accommodation” stance by a vote of 5 to 6. “Jayanth R Varma expressed reservations about this part of the resolution,” he explained.
He also stated that the MPC will make other judgments “as quickly and appropriately as required.”
According to a Business Standard survey conducted last week, the central bank is projected to hold the repo rate constant at 6.5 percent.
He also added that the MPC will issue other decisions “as quickly and appropriately as required.”
According to a Business Standard poll conducted last week, the central bank is expected to keep the repo rate at 6.5 percent unchanged.
Das also stated in his address that India’s foreign reserves remained at $595.1 billion on June 2. Furthermore, the current account deficit is predicted to have narrowed significantly in the final quarter of the previous fiscal year and “should be eminently manageable” in FY24.
Between May 2022 and February 2023, the RBI raised the repo rate by 250 basis points to 6.5 percent. The MPC voted to stop raising interest rates in April 2023. RBI Governor Shaktikanta Das stressed that it was a pause, not a pivot, and that more tightening was still possible.
In his speech, Das also revealed that India’s foreign reserves stood at $595.1 billion on June 2. In addition, the current account deficit is expected to have shrunk dramatically in the last quarter of the previous fiscal year and “should be eminently manageable” in FY24.
The RBI hiked the repo rate by 250 basis points to 6.5 percent between May 2022 and February 2023. The MPC voted in April 2023 to cease rising interest rates. RBI Governor Shaktikanta Das emphasized that the move was only a pause, not a pivot, and that more tightening was still conceivable.
The MPC also resolved, by a five-to-one vote, to keep the focus on gradually reducing accommodation to ensure that inflation gradually aligns with the objective while sustaining growth.