RBI MPC maintains status quo on repo rate at 6.5%

RBI MPC meeting outcome: In its latest Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) announced its decision to maintain the status quo on the repo rate at 6.50 per cent for the sixth consecutive time.

“With the fundamentals of the Indian economy remaining strong despite all global headwinds and inflation well under control, the RBI once again decided to keep the repo rates unchanged at 6.5 per cent, thus extending the festive bonanza that it gave to homebuyers in its last two policy announcements. Thus, homebuyers retain their advantage of relatively affordable home loan interest rates,” said Anuj Puri, Chairman, ANAROCK Group.

“If we consider the present trends, the housing market has been unstoppable, and unchanged home loan rates will help maintain the overall positive consumer sentiments. Given that housing prices have risen across the top 7 cities in the last one year, this breather by the RBI is a distinct advantage to homebuyers,” he added.

Puri also said, according to the company research, 2023 saw average housing prices rise by anywhere between 10-24 per cent in the top 7 cities, with Hyderabad recording the highest 24 per cent jump. The average prices in these markets stood at approx. Rs 7,080 per sq. ft., while in 2022 it was approx. Rs 6,150 per sq. ft. – a collective increase of 15 per cent.

"Going forward, we can expect the momentum in housing sales to continue, significantly aided by the unchanged repo rates which will keep home loan interest rates attractive and also signal the ongoing robustness of India’s positive economic outlook," he added.

This decision aligns with the RBI's efforts to ensure inflation remains within the central bank's target range of 2-6 per cent while simultaneously supporting economic growth.

Notably, the RBI held the benchmark policy repo at 6.5 per cent for the five consecutive meetings preceding this decision, reflecting a concerted effort to manage inflation amidst easing cost pressures.

The country witnessed a slowdown in annual inflation, dropping to a four-month low of 4.87 per cent in October, primarily driven by decreases in housing and clothing and footwear prices.

However, RBI Governor Shaktikanta Das cautioned about the potential for accelerated inflation in November and December, particularly due to food price pressures.

In its revised economic outlook for fiscal year 2024, the RBI upgraded its growth forecast to 7 per cent from the previous estimate of 6.5 per cent. The projections include growth rates of 6.5 per cent for Q3 and 6 per cent for Q4. Meanwhile, the central bank maintained its inflation projection for the current fiscal year at 5.4 per cent.

In addition to keeping the repo rate unchanged, the RBI left both the marginal standing facility (MSF) and bank rates steady at 6.75 per cent. Furthermore, the standing deposit facility (SDF) rate remained unchanged at 6.25 per cent.

The RBI's decision to maintain the status quo reflects its cautious approach to balancing inflationary pressures with the imperative of sustaining economic growth in the current macroeconomic landscape.