Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das announced that the Monetary Policy Committee (MPC) has decided to keep interest rates unchanged for the ninth consecutive meeting. The decision reflects strong demand and the need to sustain the declining trend in inflation.
Key MPC Decisions:
- Policy Repo Rate: Held steady at 6.5%
- Standing Deposit Facility Rate: Remains at 6.25%
- Marginal Standing Facility Rate and Bank Rate: Both at 6.75%
The MPC’s decision was made with a majority vote of 4:2. The committee will continue focusing on the withdrawal of accommodation to ensure inflation aligns progressively with the target while supporting economic growth.
Growth and Inflation Forecasts:
- FY25 Growth Forecast: Retained at 7.2%
- Q1FY25 Growth Forecast: Adjusted from 7.3% to 7.1%
- FY25 Inflation Forecast: Maintained at 4.5%
The governor explained that the slight reduction in the growth projection for Q1FY25 is due to updated high-frequency indicators and anticipated central expenditure and core industries data. Although there is a discrepancy between headline inflation and food inflation, attention is needed on food prices due to their potential to influence overall inflation.
Recommendations for Banks:
- Banks are encouraged to focus more on mobilizing household deposits rather than relying on wholesale resources for lending.
- Current reliance on short-term non-retail deposits and other liability instruments to meet incremental demand poses potential structural risks.
- Banks should seek innovative products and services to attract household financial savings.
Additional Remarks:
- The latest policy decision marks the 50th MPC meeting since its establishment in September 2016.
- The framework has been effective in maintaining macroeconomic stability, even during periods of stress.
- The near-term global growth outlook is positive, but long-term challenges include demographic shifts, climate change, geopolitical tensions, rising public debt, and advancements in technologies like artificial intelligence.
On the domestic front, the monsoon season is progressing as expected, with robust service sector expansion, a recovery in rural demand, and steady discretionary spending in urban areas supporting household consumption.
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