During the latest Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das announced that the Reserve Bank of India (RBI) will maintain the repo rate at 6.5%. This decision continues a trend seen over the last eight reviews since February 2023, indicating a cautious approach in light of rising inflation, particularly within the volatile food sector. This consistent hold on the repo rate marks the second-longest pause in the past 25 years.
Indeed, this was largely anticipated by economists in view of the hardening inflation. Latest data shows that Consumer Price Index-based inflation—or retail inflation—of India rose to a four-month high of 5.08% in June 2024, driven by surge in food price inflation that rose to 9.36 per cent from 8.69 per cent previous month. At the backdrop of CPI data for July to be released on August 12, significant pressure is put on the MPC for taking cognizance of these concerns over rising inflation.
Yet, to everyone’s surprise, the Indian economy has turned in some good economic performance. It grew at an appreciable 8.2 percent in the 2023–24 financial year, and FY25 is forecast between 7 to 7.2 percent according to the RBI and Deloitte India estimates.
It was recalled that during its last MPC meeting in June, such decision of retaining the key interest rates was also prompted by concerns on the inflation. By a majority vote of the committee members, it was the one decided.
The outlook of monetary policy remains highly dynamic across the globe. In its most recent move, the US Federal Reserve pegged interest rates at 5.25-5.50%, with possible rate cuts expected to begin as early as September, pending upcoming economic data. As the RBI comes up with its outlay, the dilemma between the objectives of economic growth and containing too-high inflation will still be a challenge. Stay tuned for further updates on this pivotal announcement.
Do you have a news tip for Lakshmishree reporters? Please email us at media@lakshmishree.com
Source: Moneycontrol
News Desk
