In its three-day monetary policy committee meeting, the Reserve Bank of India unanimously opted to maintain the repo rate at 6.5%, as most financial markets estimated.
RBI Governor Shaktikanta Das said on Thursday at a press conference, “Monetary Policy Committee decided unanimously to keep the repo rate unchanged at 6.5%”
The Reserve Bank of India (RBI) usually holds six meetings within a financial year, occurring every two months. During these meetings, the RBI makes decisions regarding interest rates and the money supply. The third meeting of the 2023-24 fiscal year commenced on a Tuesday.
During its prior session in early June, the monetary policy committee of the central bank reached a unanimous agreement to maintain the repo rate at 6.5%, a decision that was widely anticipated by the majority of analysts. Similarly, in its April meeting, the RBI also opted to keep the repo rate unchanged.
The repo rate represents the interest rate at which the RBI provides loans to other banks.
The central bank may have chosen to once again adjust the main interest rate due to a continual decrease in inflation, currently at its lowest point in 18 months, and the possibility of further reduction. While inflation has been a source of worry for various nations, including developed economies, India has effectively navigated its path of inflation.
With the exception of the halt in April, the RBI has increased the repo rate by a total of 250 basis points, or 6.5%, since May 2022 in an effort to combat inflation. Raising interest rates is one monetary policy tool that frequently works to reduce demand in the economy and lower inflation.
For three consecutive quarters, India’s consumer price inflation remained higher than the RBI’s target of 6 percent, only returning to the RBI’s preferred range in November 2022. As per the flexible inflation targeting framework, the RBI is considered unsuccessful in controlling price increases if the inflation measured by the Consumer Price Index (CPI) remains beyond the range of 2-6% continuously for three quarters.
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