RBI MPC Meeting: Interest Rates and GDP Growth

RBI MPC Meeting: Key Takeaways on GDP Growth, Inflation, and Interest Rates

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, concluded its meeting with significant decisions regarding inflation, growth, and interest rates. The MPC decided to keep interest rates unchanged and shifted its policy stance from “withdrawal of accommodation” to “neutral.”

Key Interest Rates

The RBI has kept key interest rates unchanged. The repo rate remains at 6.50%, the Standing Deposit Facility (SDF) is at 6.25%, and the Marginal Standing Facility (MSF) rate stands at 6.75%. These rates have now remained steady for ten consecutive meetings.

The central bank stated that these decisions aim to achieve the medium-term inflation target of 4%, within a tolerance band of +/- 2%, while also fostering economic growth.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, commented, “RBI’s decision to hold rates while changing the stance to neutral is completely in line with our expectations.”

GDP Growth Projections

The RBI maintained its GDP growth forecast for the financial year 2024-25 at 7.2%. The economy displayed resilience in the first quarter of FY25, with a growth of 6.7%, driven by strong private consumption and investment.

Governor Das highlighted that the growth outlook remains positive, supported by good rainfall, steady manufacturing, and a robust services sector. The ongoing festival season, coupled with healthy kharif sowing, is expected to boost private consumption.

Inflation Outlook

Headline inflation had dropped to 3.6% in July and 3.7% in August. However, inflation is expected to rise in September due to higher food prices. The MPC expects food inflation to ease by Q4 FY25, aided by good crop arrivals and a strong rabi season.

MPC Voting Results

The decision to maintain the repo rate at 6.50% was supported by five out of six members. Dr. Nagesh Kumar was the only member who voted for a 25 basis point reduction in the rate.

Conclusion

The RBI’s shift to a neutral stance reflects the current balance of inflation and growth. This not only supports economic growth but also ensures monetary policy stability. The next two RBI MPC meetings are scheduled for December 4-6, 2024, and February 5-7, 2025.

Aakhir Tak Editor-in-Chief

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