The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has kept the repo rate unchanged at 6.5% for the eighth consecutive time, following its recent meeting. This meeting marks the first since the Lok Sabha election results were declared.
RBI Governor Shaktikanta Das announced a revision of the GDP growth projection for FY25 to 7.2%, up from the previous estimate of 7%. The RBI’s mandate from the government is to maintain CPI inflation at 4%, with a margin of 2% on either side.
In April, the Central Bank decided to maintain the repo rate at 6.5% and continued its policy stance of ‘withdrawal of accommodation’. Both decisions were made with a majority vote of 5:1 by the six-member MPC, led by Das.
Keeping the repo rate steady means that external benchmark lending rates linked to the repo rate will not increase, providing relief to borrowers as their equated monthly installments (EMIs) will remain stable.
However, lenders may raise interest rates on loans linked to the marginal cost of fund-based lending rate, where the full transmission of a 250 bps hike in the repo rate between May 2022 and February 2023 has not yet occurred.
Governor Das emphasized the importance of managing food price uncertainties to mitigate inflation risks, likening the current situation to an “elephant” that has left but needs to stay away from disrupting the economy.
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