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RBI MPC Meeting Highlights: Repo rate remains unchanged at 6.5%

RBI MPC Meeting Highlights

MPC members maintained status quo on key policy rates in February meeting for sixth consecutive time, while remaining focused on the withdrawal of accommodation to ensure inflation progressively aligns with the target. The MPC maintained its commitment to maintain inflation at 4%. The MPC members acknowledged that domestic economic activity is enduring positively but expressed concerns over geopolitical tensions and the effect of volatile food price on inflation.

Key points from the RBI policy meeting.

  • Repo rate remained unchanged at 6.5%, and the liquidity adjustment facility (LAF) remained unchanged at 6.50%.
  • Standing deposit facility (SDF) rate remains unchanged at 6.25%, marginal standing facility (MSF) rate and the bank rate kept at 6.75%.
  • MPC members decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
  • Real GDP growth for 2024–25 is projected at 7.0%, with Q1 at 7.2%, Q2 at 6.8%, Q3 at 7.0%, and Q4 at 6.9%.
  • Uncertainty in food prices continues to impinge on headline inflation.
  • Retail inflation is expected to average 5.4% this fiscal, to come down to 4.5% in 2024–25.
  • Domestic economic activity is strengthening and household consumption is expected to improve, while prospects for fixed investment remain bright owing to an upturn in the private capital cycle, healthy balance sheets of banks and corporate, and the continuation of the government’s thrust on capex.
  • Rural demand continues to gather pace, while urban consumption remains strong.
  • Increasing geopolitical tension is impacting the supply chain, putting pressure on commodity prices.
  • Monetary transmission by financial institutions still remains incomplete.
  • Lenders will have to provide key fact statements regarding loans to retail and MSME borrowers.
  • Regulated entities should accord the highest priority to compliance and consumer interest protection.
  • RBI to introduce offline functionality in CBDC-Retail for transactions in areas with poor or limited internet connectivity.
  • Next monetary policy committee (MPC) meeting is scheduled for April 3–5, 2024.
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