December 6, 2024: The Reserve Bank of India (RBI) announced on Friday, December 6, that it will keep the repo rate unchanged at 6.5%, in line with expert expectations. This decision comes as the Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, concluded its three-day meeting.
The RBI reduces CRR by 50 bps to 4%,. It will be implemented in two phases. This move will inject ₹1.16 trillion into the banking system. This is what the market was looking for.
Economic Context and Projections
The central bank revised India’s GDP growth projection for FY25 to 6.6%, down from its earlier estimate of 7.2%, citing challenges in specific areas of the manufacturing sector. Despite these issues, the RBI remains optimistic about broader economic stability.
High food inflation, expected to persist through Q3 before easing in Q4 FY25, and sluggish GDP growth influenced the RBI’s decision to maintain the repo rate. The central bank has raised rates by 250 basis points since May 2022 to keep inflation within the government-mandated 4% target range (±2%).
Inflation Risks Highlighted
Governor Das cautioned against rising inflation risks stemming from weather-related disruptions, financial volatility, and geopolitical uncertainties. “High inflation impacts consumers by reducing disposable income, which in turn affects spending and economic growth,” Das remarked.
Monetary Policy Decision
The MPC decided by a 4-2 majority to hold the repo rate at 6.5%. The Standing Deposit Facility (SDF) rate remains at 6.25%, and the Marginal Standing Facility (MSF) rate is at 6.75%. The committee unanimously maintained a neutral policy stance, reflecting a cautious approach to the current economic environment.
Das on Balancing Inflation and Growth
“Our effort is to follow the flexible inflation target,” said Das, emphasizing the RBI’s dual mandate to ensure price stability while supporting sustainable economic growth.
Key Takeaways:
- Repo Rate: Unchanged at 6.5%.
- GDP Growth Projection: Revised down to 6.6% for FY25.
- Inflation Outlook: High food inflation expected in Q3, easing in Q4 FY25.
- Policy Stance: Neutral, signaling a cautious approach.
As Governor Das’s current term nears its end on December 10, the RBI’s actions reflect its commitment to balancing inflation management and economic stability.
Suggested Tags:
#RBIPolicy #MonetaryPolicy #RepoRate #IndianEconomy #Inflation #GDPGrowth #ShaktikantaDas #RBIUpdates
