RBI MPC: MPC meeting: RBI leaves policy rates unchanged, maintains status quo on stance as inflation fight continues

The Reserve Bank of India’s rate-setting panel unanimously has opted to keep the benchmark lending rate unchanged at 6.5 per cent, Governor Das announced on Thursday. The MPC, with a majority of five out of six members, voted to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, Das said.

News agency Reuters polled 64 economists, all of whom expected no change.

Consequently, the Standing Deposit Facility (SDF rate) remains at 6.25% and the marginal standing facility and the bank rates stand at 6.75%.

“While keeping the policy rate unchanged, the RBI remained cautious on inflationary risks going forward and was sufficiently hawkish — reiterating the need to keep monetary conditions tight to anchor inflation at 4% through the year. The commentary on growth was upbeat as expected with the RBI keeping its projection unchanged at 6.5% for FY24. The central bank could keep rates unchanged through the year with the chance of any rate cuts in FY24 seeming slim for now,” said Sakshi Gupta, Principal Economist, HDFC Bank.

The MPC is meeting in the backdrop of retail inflation declining to an 18-month low of 4.7 per cent in April. Headed by RBI Governor Das, the six-member MPC met on June 6, 7 & 8.

In April, the MPC had kept the benchmark interest rates unchanged at 6.5 per cent on the back of easing retail inflation and the need to push economic growth. The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.Earlier, the RBI had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.Slowing inflation and a robust recovery in economic growth are seeing aiding the central bank’s decision to stay pat on rates but concerns around global growth slowdown and its resultant impact on the domestic economy will be a key concern.

Economists expected the stance to be maintained this month as the MPC prefers to stay on wait-and-watch mode to gauge the fallout of weather conditions on the price trend before considering a pivot to easing.

Addressing a CII event last month, Governor Das said that the MPC would be guided by “what’s happening on the ground” on the issue of whether to take a pause again or not in its next meeting.

“(Increase in rate) The monetary policy acts with a time lag and you have to allow that time for the monetary policy to play out and transmit,” he said. “The situation is extremely fluid, it’s extremely dynamic. I would also like to say the war against inflation isn’t over. We have to remain alert. There is no cause for complacency, especially we have to see how the anticipated El Nino factor plays out,” he added.