RBI governor Shaktikanta Das-led Monetary Policy Committee (MPC) kept the key repo rate unchanged at 6.5% along expected lines. Sh...
RBI governor Shaktikanta Das-led Monetary Policy Committee (MPC) kept the key repo rate unchanged at 6.5% along expected lines. Shaktikanta Das said that GDP growth is expected to be at 7% in FY 2024-25 and CPI inflation is projected at 4.5%. The risks are evenly balanced. According to Shaktikanta Das the elephant in the room (inflation) has left the room and is on its way to the forest.This was the first RBI MPC meeting for the new fiscal year and amidst the global economic uncertainties and with the US Federal Reserve yet to start the rate cut cycle, economists and analysts were of the view that the RBI will keep the repo rate unchanged. This expectation was specially driven by the fact that India's GDP growth for the third quarter came in at a better than expected strong number of 8.4%. CPI inflation, while finally within RBI's comfort zone of 2-6%, is still at an elevated level.The Reserve Bank of India and the Monetary Policy Committee usually hold a meeting once in two months to decide on the key repo rate. The repo rate is important since it is the rate at which the central bank lends to the commercial banks. It is a key decider of liquidity in the system. A high repo rate means that banks find it costly to borrow money from the RBI, hence keep their own loan rates higher, making borrowing for the common person more expensive. Similarly, a lower repo rate means that banks have earlier access to capital and hence, lending rates are lower, making loans less costly.RBI initiated a rate hike cycle in 2022 and has since then raised the repo rate by 250 basis points to 6.5%. While the pause button on the repo rate hike has been hit for several quarters now, the rate cut cycle is expected to start in the second half of this year, believe economists. These expectations come on the back of global economic conditions and strong GDP growth numbers which provide RB