Advertisement

Updated June 8th, 2023 at 11:05 IST

RBI MPC hits pause on rate hike for second time in a row, holds repo rate at 6.5%

Monetary Policy Committee (MPC) headed by Governor Shaktikanta Das unanimously decided to hold repo rate steady at 6.5%

Reported by: Abhishek Vasudev
RBI Governor Shaktikanta Das
RBI Governor Shaktikanta Das | Image:self
Advertisement

The Reserve Bank of India's six-member Monetary Policy Committee (MPC) headed by Governor Shaktikanta Das unanimously decided to hold repo rate steady at 6.5 per cent and maintained policy stance as "withdrawal of accommodation" as inflation has been trending below its upper end of tolerance band of 6 per cent in the last two months.

Repo rate is the interest rate at which Reserve Bank of India lends money to the commercial banks.

RBI Governor Shaktikanta Das said the MPC unanimously decided to keep the rate unchanged at 6.5 per cent.

While keeping the interest rate intact, Das said headline inflation still remains above RBI's target of 4 per cent and expected to remain so during the rest of the year.

Inflation projection has been slashed marginally to 5.1 per cent from earlier estimate of 5.2 per cent for current financial year.

"CPI inflation is projected at 5.1 per cent for 2023-24, with Q1 at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent," Governor Das said. 

He said retail inflation has been below the upper band of 6 per cent for the last two years.

"The MPC maintained unchanged interest rates, as expected. The RBI governor's less hawkish tone acknowledged moderating inflation but highlighted uncertainty around the monsoon. The market had already factored in this policy, maintaining its bullish momentum. The Governor's comment suggests a prolonged pause, pleasing the market," said  Santosh Meena, Head of Research at Swastika Investmart.

The MPC meeting took place against the backdrop of CPI inflation declining to a 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12.

The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.

The MPC had continuously raised rates for six times in a row starting with an off cycle rate hike in May 2022 tracking spike in inflation which soared after Russian invasion of Ukraine. The RBI has collectively raised repo rate by 250 basis points to 6.5 per cent before hitting a pause button in the April policy decision after inflation cooled down to 18-month low of 4.7 per cent in March.

The RBI has guided for Indian economy to grow at 6.5 per cent in financial year 2023-24 with first quarter GDP expected to grow at 8 per cent, second quarter growth at 6.5 per cent, third quarter GDP growth at 6 per cent and fourth quarter growth at 5.7 per cent.

Advertisement

Published June 8th, 2023 at 10:10 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement

Trending Quicks

Congress Kangana Ranaut
a few seconds ago
Bengaluru Traffic Restrictions For Feb 25 Owing to Constitution Awareness Campaign: Check Routes
2 minutes ago
Mandi Lok Sabha seat Pratibha Singh
3 minutes ago
Palestinian President Mahmoud Abbas has announced the formation of a new PA cabinet.
4 minutes ago
rupees-dearness-allowance
7 minutes ago
Chandrakant Pandit and Gautam Gambhir
10 minutes ago
Shahjahan Sheikh in CBI Custody: First Visual Emerges | WATCH
17 minutes ago
Pushpa 2
21 minutes ago
Advertisement
Advertisement
Advertisement
Whatsapp logo