RBI announces monetary policy, keeps repo rate unchanged at 6.5%

Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), on Thursday, announced its decision not to raise the repo rate. While announcing the decision, RBI Governor Shaktikanta Das said that the MPC took the decision unanimously.

“The MPC decided unanimously to keep the policy change unchanged at 6.5 per cent,” Das said.

He added that the MPC decided, by a majority of 5 out of 6, to continue with its stance of “withdrawal of accommodation”. The MPC will take further decisions “promptly and appropriately as required,” he added.

The RBI increased the repo rate by 250 basis points to 6.5 per cent between May 2022 and February 2023. In April 2023, the MPC decided to hit the pause button on rate hikes. RBI Governor Shaktikanta Das emphasised that it was a pause, not a pivot while retaining the possibility of further tightening.

The consumer price index-based (CPI) inflation – the main yardstick for monetary policymaking – in April declined to an 18-month low of 4.7 per cent year-on-year (YoY) (from 5.7 per cent YoY in March), well within the RBI’s 2-6 per cent target band.

In the last policy announcement in April, the MPC had hit a pause button on the repo rate hikes. In his speech, while retaining the key interest rate at 6.5 per cent, Das said that it was a “pause, not a pivot”. The pause came after six successive rate hikes.

The decision to press the pause button was taken unanimously by the rate-setting body, which has three external members and three members from within the RBI.

In April, the MPC had also decided, by a five-to-one majority, to remain focused on withdrawing accommodation to ensure that inflation progressively aligns with the target while supporting growth.

In his April statement, RBI Governor Shaktikanta Das had said, “Economic activity remains resilient and real gross domestic product (GDP) growth is expected to have been 7 per cent in 2022-23. Consumer price inflation (CPI) has, however, increased since December 2022, driven by price pressures on cereals, milk, and fruits.”