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Below the Quote on Reaction Monetary Policy By Mr Nikunj Saraf , Choice International Limited

“The RBI has decided to hold its key interest rate steady at 6.50% for the ninth consecutive meeting. This decision, approved by a 4:2 majority, demonstrates the central bank's ongoing commitment to balancing the need for inflation control with supporting overall economic stability. Maintaining its 'withdrawal of accommodation' stance, the RBI is aiming to manage inflation while still nurturing growth. Food inflation remains a major concern, with the Consumer Price Index (CPI) reaching 5.1% in June, largely driven by rising vegetable prices. Given that food items account for a significant portion of the CPI basket, the RBI's focus on reining in these prices is crucial. Although the RBI has retained its FY25 real GDP growth forecast at 7.2%, slight downward revisions to the quarterly projections suggest a somewhat cautious view of the immediate economic conditions. However, positive factors like a favourable monsoon and increased kharif sowing are expected to buoy economic growth. To facilitate lending, the RBI is emphasizing flexible liquidity management, as evidenced by the rise in top-up home loans. However, any potential rate cuts are likely to be postponed until late 2024, with the priority being on controlling inflation over providing short-term economic stimulus. The central bank has also introduced new regulatory measures, including the creation of a public repository for digital lending apps and an increase in the UPI tax payment limit to boost digital transactions. With record-high forex reserves of $675 billion, the RBI is well-positioned to handle external economic shocks, but remains vigilant to global economic trends.”

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