The News Freedom
Mumbai, December 8
Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that the Monetary Policy Committee (MPC) decided to keep the key lending rate, the repo rate, unchanged at 6.50 percent. Following this decision, the standing deposit facility (SDF) rate will remain at 6.25 percent, while the marginal standing facility (MSF) rate and the Bank Rate will stay at 6.75 percent.
“The MPC arrived at this decision after a three-day deliberation on December 6th, 7th, and 8th during which they meticulously evaluated the current macroeconomic and financial landscape, as well as the economic outlook.” RBI Governor Das said.
Das said that by a majority of 5 out of 6 members, the committee declared their continued focus on withdrawing accommodative measures. This strategy aims to ensure inflation progressively aligns with the target while simultaneously supporting economic growth.
— ReserveBankOfIndia (@RBI) December 8, 2023
Giving details, the RBI Governor said that since the last policy, CPI headline inflation moderated to 4.9 per cent in October from 7.4 per cent in July. “The moderation was observed in all components of CPI – food, fuel and core (CPI excluding food and fuel). There has been broad-based easing in core inflation which is indicative of successful disinflation through monetary policy actions. The near-term outlook, however, is masked by risks to food inflation which might lead to an inflation uptick in November and December,” he said.
Das said that this needs to be watched for second round effects, if any. Domestic economic activity is holding up well as assessed in the previous MPC meetings and as reflected in the Q2:2023-24 GDP growth.
“Against this backdrop, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent, but remain highly alert and prepared to undertake appropriate policy actions, as warranted,” he said. RBI Governor Das added that monetary policy must continue to be actively disinflationary to ensure fuller transmission and anchoring of inflation expectations. “The rate action so far is still working its way into the economy. Hence, the MPC decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth,” he further said.
RBI Governor further said that the global economy continues to remain fragile. World trade is decelerating amidst global tide of protectionism. “Despite significant restoration of global supply chains, factors like elevated debt levels, lingering geopolitical hostilities and extreme weather conditions aggravate the risks to global growth and inflation outlook,” he said. “Easing of inflation in advanced economies has led to expectations of an early end to the monetary tightening cycle, shoring up market sentiments. Sovereign bond yields are softening as markets are not factoring in any further rate hikes,” he further said.