RBI keeps repo rate unchanged at 6.5% in first Bi-monthly policy of FY24
In a surprise move, the Reserve Bank of India (RBI) has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent at its first Bi-monthly policy of the Fiscal Year 2023-24 (FY24), even as inflation is trending above its tolerance level. The rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022. Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
RBI’s Monetary Policy Committee (MPC) also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
On the inflation front, CPI inflation is projected at 5.2 per cent for 2023-24, with Q1 at 5.1 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent, and risks evenly balanced. On the economic growth front, real gross domestic product (GDP) growth for 2023-24 is projected at 6.5 per cent with Q1:2023-24 at 7.8 per cent; Q2 at 6.2 per cent; Q3 at 6.1 per cent; and Q4 at 5.9 per cent, with risks evenly balanced.
