RBI holds interest rates steady for sixth meeting in a row

The Reserve Bank of India (RBI) has elected to keep its key policy rate unchanged at 6.5% following its latest Monetary Policy Committee (MPC) meeting on Thursday, 8th February. This marks the sixth consecutive time the central bank has maintained the status quo.

"Uncertainty in food prices continues to affect headline inflation. Momentum in domestic activities remains strong," said RBI Governor Shaktikanta Das during his briefing.

Das added that monetary policy must persist in being actively disinflationary. Five out of the six MPC members voted in favor of holding rates steady.

"Global growth is expected to stay stable in 2024, though performance will vary across regions," the governor noted. "While global trade momentum remains weak, signs of recovery are emerging and trade is likely to expand faster in 2024. Inflation has softened considerably and should moderate further this year."

At its last MPC gathering on 8th December, the RBI kept the repo rate unchanged for the fifth meeting running. Governor Das had raised the economic growth projection to 7% for the current financial year, up from 6.5% previously.

The MPC is tasked with deciding the policy repo rate to achieve the inflation target, while considering the objective of growth.

Retail inflation this financial year declined after peaking at 7.44% in July 2023, but remains elevated at 5.69% in December, albeit within the RBI's 4-6% comfort zone.

Looking back at the governor's remarks last month, Das said the Indian economy should log 7% growth in the coming financial year, with inflation likely to ease further. He credited the Centre's recent structural reforms for boosting India's medium and long-term growth outlook.

Meanwhile, Finance Minister Nirmala Sitharaman stated in her interim budget address that India would sharply reduce its budget gap in 2024-25, focusing on infrastructure and long-term reforms to drive growth.