RBI keeps Repo rate unchanged at 6.5%

 RBI keeps Repo rate unchanged at 6.5%

In its February review meeting, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously opted to maintain the policy repo rate at 6.5 percent, marking the sixth consecutive time of keeping it unchanged.

The repo rate denotes the interest rate at which the RBI lends to other banks.

Following a three-day review meeting, RBI Governor Shaktikanta Das, deliberating on the policy statement on Friday morning, cited favorable inflation levels and robust growth dynamics as the rationale behind maintaining the current policy stance.

Das noted that inflation is approaching the target and growth is outperforming expectations. Despite retail inflation in India being within the RBI's comfort range of 2-6 percent, it exceeds the ideal scenario of 4 percent, standing at 5.69 percent in December.

The MPC, with a majority of 5 out of 6 members, resolved to maintain its focus on withdrawing accommodation to ensure a gradual alignment of inflation with the target while bolstering growth.

During the July-September quarter of the 2023-24 financial year, the Indian economy expanded by 7.6 percent, maintaining its status as the fastest-growing major economy. In the preceding April-June quarter, GDP growth reached 7.8 percent.

The three-day bi-monthly meeting of the RBI's monetary policy committee commenced on Tuesday. Typically, the RBI conducts six such meetings annually, discussing interest rates, money supply, inflation forecasts, and various macroeconomic indicators.

Given the notable decline in inflation and its potential for further decrease, the central bank likely opted to maintain the status quo on the key interest rate. Despite concerns about inflation worldwide, India has largely managed its inflation trajectory effectively.

Apart from recent pauses, the RBI has increased the repo rate by 250 basis points cumulatively to 6.5 percent since May 2022 in its efforts to combat inflation. Raising interest rates is a monetary policy tool typically utilized to suppress demand in the economy, consequently aiding in reducing the inflation rate.