The Reserve Bank of India’s Monetary Policy Committee met today to review the prevailing economic situation of the country and decide on the monetary policy stance. In this in-depth analysis, we delve into the key developments of the meeting and seek to understand the rationale behind RBI’s policy decision.
As per reports, the six-member MPC headed by RBI Governor Shaktikanta Das began its deliberations on February 7th. Going into the meeting, most analysts expected the central bank to keep the repo rate unchanged for the sixth consecutive time at 6.5%, given that retail inflation continues to remain above the RBI’s upper tolerance limit of 6%.
Wholesale price-based inflation has also shown signs of moderating recently but still remains in double-digits. Meanwhile, economic growth has picked up aided by rising exports and government capital spending. However, risks persist from a potential global recession and volatility in commodity prices and currency markets.
During his announcement today, Governor Das noted that inflation has declined significantly but is still above the target of 4%. He emphasised the need for monetary policy to remain actively disinflationary. Das said global growth is expected to remain steady in 2024 but inflation has softened and is projected to moderate further over the course of the year.
On the domestic front, Das pointed out that the investment cycle is gaining momentum supported by rising capital expenditure. However, uncertainties around food prices continue to impinge on headline inflation. Das also acknowledged that financial market segments have adjusted to evolving liquidity conditions.
In view of these factors, the MPC unanimously voted to keep the repo rate unchanged at 6.5% and maintain an accommodative stance as long as necessary to revive growth on a durable basis while ensuring inflation remains within the target. The central bank also decided to continue its focus on liquidity management through VRRR auctions.
In conclusion, the RBI has adopted a careful approach balancing inflation and growth concerns. While inflationary pressures are receding, upside risks persist warranting continued monetary policy tightening. The stable rate decision is expected to support the ongoing economic recovery without stifling growth momentum. RBI’s Monetary Policy Committee met today and decided to keep the repo rate unchanged at 6.5% for the sixth consecutive time, aiming to continue supporting growth while also ensuring a durable decline in inflation. In view of these all dicision are taken.
