Reserve Bank of India's (RBI) Monetary Policy Committee kept the repo rate unchanged for the 8th consecutive time at 6.5 per cent. Everyone was closely watching the second MPC meeting of FY25, especially since it took place right before the upcoming budget and after the election results.
The RBI commenced its three-day monetary policy committee (MPC) meeting on June 5. The last interest rate hike by the central bank occurred in February 2023.
"The Monetary Policy Committee decided by a 4:2 majority to keep the policy repo rate unchanged at 6.5 per cent," RBI Governor Shaktikanta Das said.
Following an initial increase of 250 basis points, the RBI had shifted to a pause stance in April of the previous year.
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Speaking on the economic health of the nation, Das said, "The development with respect to growth and inflation are unfolding as per expectation. When the projected growth of 7.2 per cent for FY25 materialises, it will be the fourth consecutive year of growth at or above 7 per cent for India."
Headline inflation remains on a downward trend. The MPC kept the inflation projection for FY25 unchanged at 4.5 per cent. The RBI forecasts CPI inflation for Q1FY25 at 4.9 per cent, Q2FY25 at 3.8 per cent, Q3FY25 at 4.6 per cent, and Q4FY25 at 4.5 per cent.
However, food inflation will still remain a key concern for the apex bank.
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The governor also clarified that while the actions of the Federal Reserve are important, the primary factors guiding RBI's decision are domestic conditions such as growth, inflation and overall economic outlook. "Fed matters but local weather and pitch conditions key guide," he added.
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