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Informist, Friday, Feb. 7, 2025

 

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--RBI Malhotra: MPC voted to cut repo rate by 25 bps to 6.25% 
--RBI Malhotra: MPC voted unanimously to cut repo rate by 25 bps to 6.25% 
--RBI Malhotra: SDF rate adjusted to 6.00% 
--RBI Malhotra: MSF and Bank rate adjusted to 6.50% 
--RBI Malhotra: MPC voted unanimously to maintain 'neutral' policy stance 
--RBI Malhotra: MPC noted inflation has declined 
--RBI Malhotra: MPC noted Inflation expected to further moderate FY26 
--RBI Malhotra: MPC noted growth lower than FY24 
--RBI Malhotra: Growth, inflation dyanmics open up space for MPC to cut rates 
--RBI Malhotra: MPC kept neutral stance to deal with external volatility 
--RBI:Neutral stance gives MPC flexibility to respond to evolving conditions

 

NEW DELHI - The Reserve Bank of India's Monetary Policy Committee unanimously decided to lower the policy repo rate for the first time in nearly five years, bringing it to 6.25% from 6.50%, the central bank Governor Sanjay Malhotra said Friday. The committee also unanimously voted to retain the 'neutral' policy stance, having adopted it in October from 'withdrawal of accommodation'.

 

"After assessing the current and evolving macroeconomic situation, the MPC unanimously decided to continue with the neutral monetary policy stance and remain unambiguously focussed on a durable alignment of inflation with the target, while supporting growth," the monetary policy statement said. 

 

The rate-setting panel's decision to lower the repo rate was in line with expectations. In an Informist poll, 12 of the 14 respondents had expected the MPC to lower the repo rate by 25 basis points from 6.50%.

 

This was the first MPC meeting for Malhotra, who took over as RBI governor from Shaktikanta Das in December, and also for Deputy Governor Rajeshwar Rao. Rao has been given temporary charge of the RBI's Monetary Policy Department following the retirement of Michael Patra in mid-January.

 

Malhotra said that while growth is expected to recover from a seven-quarter low of 5.4% in Jul-Sept, it would be below the 8.2% for FY24. The RBI has projected FY26 GDP growth at 6.7%, higher than the 6.4% estimated by the government for the current year. The RBI sees GDP growth at 6.7% in Apr-Jun, 7.0% in Jul-Sept, and at 6.5% in Oct-Dec and Jan-Mar each. Last week, the Economic Survey projected GDP growth for FY26 at 6.3-6.8%.

 

The central bank sees CPI inflation falling to 4.2% in FY26 from the projected 4.8% in the current year. "The MPC noted that inflation has declined. Supported by a favourable outlook on food and continuing transmission of past monetary policy actions, it is expected to further moderate in 2025-26, gradually aligning with the target," Malhotra said in his statement. 

 

"These growth-inflation dynamics open up policy space for the MPC to support growth, while remaining focussed on aligning inflation with the target," Malhotra said. "The MPC felt that a less restrictive monetary policy is appropriate right now," he said. 

 

On stance, Malhotra said that the rate-setting panel kept the 'neutral' stance to deal with external volatility. "The neutral stance will provide MPC the flexibility to respond to the evolving macroeconomic environment," he said. 

 

With the repo rate lowered to 6.25%, the Standing Deposit Facility rate comes down to 6.00%, while the Marginal Standing Facility and Bank rates now stand at 6.50%.

 

The minutes of the MPC meeting will be published on Feb. 21. The next meeting of the MPC is scheduled for Apr 7-9.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani 

 

 

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