Shruti Suman
On August 8, Reserve Bank of India (RBI) Governor Shaktikanta Das announced the latest monetary policy decision, revealing that the central bank has kept the key repo rate unchanged at 6.5%. This decision marks the first monetary policy announcement following the recent budget. Governor Das emphasized that the Monetary Policy Committee’s (MPC) choices are guided by the current economic conditions in the country.
The MPC conducted its third bi-monthly policy meeting for the fiscal year 2024-25 from August 6 to August 8. Governor Das also noted that the standing deposit facility rate remains at 6.25%, while the marginal standing facility rate and the bank rate are maintained at 6.75%. The MPC decided by a majority vote (four out of six members) to remain focused on the withdrawal of accommodation to ensure inflation progressively aligns with the target while also supporting economic growth.
The RBI has also kept its GDP growth forecast for FY25 steady at 7.2%. Additionally, as of 2nd of August, India’s foreign exchange reserves have reached record high of USD 675 billion.
Governor Das assured that the Indian financial system remains resilient, bolstered by broader macroeconomic stability.
RBI Governor’s Statement on Inflation
The RBI has projected retail inflation at 4.5% for FY25, assuming a normal monsoon. Governor Das expressed optimism that retail inflation would ease with the pick-up in the southwest monsoon. The central bank will continue to monitor the consumer inflation situation closely. Core inflation has moderated to historic lows in May and June, though the MPC remains vigilant due to persistently high food inflation.
Despite core inflation being contained and a significant 15-20% drop in commodity prices, particularly metals, from their 2024 peak, food inflation remains a concern. Experts note that inflation in India still exceeds the RBI’s target range, making it unlikely for the central bank to cut rates until inflation aligns with the 4% target.
Khushi Sikarwar
NI Bureau
