look news india
Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) today decided to keep the repo rate unchanged at 6.50 per cent for the tenth consecutive time at the end of its three-day meeting. However, with the policy stance changing to neutral, the committee moved towards cutting interest rates. Five members of the six-member MPC voted in favor of keeping the repo rate intact. Borrowers will have to wait for reduction in home, auto and other loan rates and EMIs, while the interest rate will remain the same.
With the economy slowing, the MPC unanimously decided to change the policy stance from accommodative to neutral. For the first time since June 2019, there has been a change in the policy stance. In the neutral stance, the Reserve Bank has the freedom to increase or decrease the repo rate depending on the economic conditions. In the current situation, there is a possibility of reduction in repo rate.
This level has remained constant since the repo rate was increased from 6.25 percent to 6.50 percent in the February 2023 meeting.
Keeping in mind the strong consumption and investment momentum, the Reserve Bank has maintained the economic growth rate estimate for the current financial year at 7.20 percent. However, the GDP estimate for the second quarter of the current financial year has been reduced from 7.20 percent to 7 percent. GDP in the first quarter stood at 6.70 percent against the expectation of 7.10 percent.
While announcing the monetary policy, Reserve Bank of India Governor Shaktikanta Das said that the country's growth story continues due to increase in consumption and investment demand. Consumption and investment demand are the basic drivers of economic growth.
The future of private consumption looks bright given the improving agricultural outlook and rural demand. Das said, strength in the services sector will also support urban demand. He expressed hope that the capital expenditure of the Central and State Governments will be seen as per the budget estimates. The inflation rate estimate for the current financial year has been maintained at 4.50 percent. Food inflation is likely to ease in the coming months as core inflation excluding food and energy prices eases.
The governor also said there is confidence that measures to reduce inflation are succeeding, however, there are significant risks due to adverse weather conditions, geopolitical frictions and a resurgence in commodity prices. The adverse effects of these risks cannot be ignored. Inflation will have to be kept an eye on.
Talking to journalists after the meeting, the Governor said that development has not stopped due to high interest rates. Interest rates have remained high for more than a year and a half but GDP figures have remained stable.
In view of the change in policy stance, the Reserve Bank may cut the repo rate in the December meeting.
Main points of monetary policy review
* Repo rate maintained at 6.50 percent in the tenth consecutive meeting
* Monitoring policy stance changed to neutral
*GDP estimate for the current financial year kept unchanged at 7.20 percent
* Inflation forecast for FY 2025 retained at 4.50 percent
* The next MPC meeting will be held on December 4-6.