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Informist, Wednesday, Oct. 9, 2024

 

--RBI Das: Repo rate left unchanged at 6.50% 

--RBI Das: MPC voted by 5 votes to 1 to leave repo rate unchanged at 6.50% 

--RBI Das: MSF and Bank rates remain unchanged at 6.75%, SDF rate at 6.25% 

--RBI Das: Policy stance changed to neutral 

--RBI Das: MPC voted unanimously to change stance of policy to neutral 

--RBI Das: MPC stance neutral, unambiguously focused on 4% CPI aim 

 

NEW DELHI - The Reserve Bank of India's Monetary Policy Committee Wednesday voted by 5 votes to 1 to leave the policy repo rate unchanged at 6.50%. The committee, however, unanimously changed the stance of monetary policy to 'neutral' from ‘withdrawal of accommodation’ and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

 

The rate-setting panel's decision on the repo rate is in line with expectations. In an Informist poll, 29 of the 30 respondents expected the committee to stay pat on rates for the 10th meeting in a row this week. Most respondents had also expected the MPC to retain the ‘withdrawal of accommodation’ stance, with only nine predicting a change to ‘neutral’. The committee had last changed the repo rate in February 2023.

 

Wednesday's MPC meeting is the first since its reconstitution after the government last week named Delhi School of Economics Director Ram Singh, economist Saugata Bhattacharya, and Institute for Studies in Industrial Development Director and Chief Executive Nagesh Kumar as replacements for external members Shashanka Bhide, Ashima Goyal, and Jayanth Varma.

 

Nagesh Kumar dissented against the majority interest rate decision and voted for 25 basis points cut.

 

"The monetary policy action today reflects the MPC’s assessment that, at the current juncture, it would be appropriate to have greater flexibility and optionality to act in sync with the evolving conditions and the outlook," RBI Governor Shaktikanta Das said in his statement.

 

Meanwhile, the RBI left its CPI inflation and GDP growth forecasts for 2024-25 (Apr-Mar) unchanged at 4.5% and 7.2%, respectively, although it made some changes to the quarterly numbers. The revised inflation forecast of 4.1% for Jul-Sept, down from 4.4% predicted earlier, implies the RBI sees inflation in September rising to around 5.0%, having averaged 3.6% in Jul-Aug. According to an Informist poll, the headline inflation rate is seen at 5.1% in September--the joint-highest in 2024. CPI data for September will be released on Monday.

 

After Jul-Sept, the central bank sees inflation edging up to 4.8% in Oct-Dec and 4.2% for Jan-Mar. It had previously predicted that inflation in the final two quarters of FY25 would likely average 4.7% and 4.3%, respectively. It also lowered the CPI inflation forecast for Apr-Jun of FY26 to 4.3% from the earlier estimate of 4.4%.

 

On the growth front, the Indian central bank now sees the GDP growing by 7.0% in Jul-Sept, and 7.4% in both Oct-Dec and Jan-Mar. It had previously estimated growth in the final three quarters of FY25 to be 7.2%, 7.3%, and 7.2%, respectively. It also raised the growth forecast for Apr-Jun of FY26 to 7.3% from the previous estimate of 7.2%.

 

"It is with a lot of effort that the inflation horse has been brought to the stable, i.e., closer to the target within the tolerance band compared to its heightened levels two years ago," Das said. "We have to be very careful about opening the gate as the horse may simply bolt again. We must keep the horse under tight leash, so that we do not lose control."

 

With the repo rate untouched, the Standing Deposit Facility rate stays at 6.25%, while the Marginal Standing Facility and Bank rates also remain unchanged at 6.75%.

 

The minutes of the MPC meeting will be published on Oct. 23. The next meeting of the MPC is scheduled for Dec 4-6.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

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