Mumbai, Dec 6: The Reserve Bank of India (RBI) has decided to maintain its policy repo rate at 6.50%, keeping borrowing costs unchanged for the 11th consecutive meeting. The decision was made by the Monetary Policy Committee (MPC) amid ongoing concerns over elevated inflation.
The rate-setting panel, in a 4:2 majority vote, chose to keep the repo rate unchanged, signaling no immediate changes in home loan EMIs or industry borrowing costs. RBI Governor Shaktikanta Das confirmed the decision during the bi-monthly monetary policy announcement. Consequently, the standing deposit facility (SDF) remains at 6.25%, while the marginal standing facility (MSF) and the bank rate are at 6.75%.
The RBI has kept the key lending rate stable since February 2023, due to persistent inflationary pressures. In October 2024, retail inflation surged to 6.2%, surpassing the RBI’s upper tolerance level of 6%. High inflation continues to affect disposable income, dampening private consumption and slowing economic growth.
ICRA Chief Economist Aditi Nayar noted that the decision aligns with expectations, considering the inflation outlook. However, she pointed out that a reduction in the cash reserve ratio (CRR) by 50 basis points could help support growth, especially after the downward revision in the FY25 growth forecast. “If CPI inflation drops below 5% by December 2024, the likelihood of a repo rate cut in February 2025 increases,” Nayar said.
In addition to the rate decision, the MPC reiterated its neutral stance and commitment to aligning inflation with the target while supporting growth. The panel met over December 4-6 to assess macroeconomic conditions.
The RBI also revised its GDP growth forecast for FY25 to 6.6%, down from the previous 7.2% projection. This revision follows a slowdown in economic growth, with the National Statistical Office reporting a 5.4% growth in Q2 of FY25, the lowest in seven quarters. The economy grew 6.7% in Q1 and 8.1% in Q2 of FY24.
Governor Das acknowledged the recent slowdown, stating that while growth remains resilient, it requires careful monitoring. “Despite recent challenges in growth and inflation, the Indian economy continues its balanced path towards progress,” he said.
Looking ahead, the RBI expects food inflation to ease in Q4, with seasonal reductions in vegetable prices and the arrival of the kharif harvest. Retail inflation for FY25 is projected at 4.8%, with Q3 at 5.7% and Q4 at 4.5%.
The RBI’s decision and economic outlook reflect ongoing concerns over inflation and growth as India navigates its economic trajectory.
