MPC voted to remain focused on withdrawal of accommodation by 5 votes to 1, said RBI’s Shaktikanta Das while announcing the committee’s decision. FY24 inflation projection unchanged at 5.4 percent.
The Reserve Bank of India’s Monetary Policy Committee (MPC), as expected, left the repo rate, the rate at which the central bank lends short-term funds to banks, unchanged at 6.5 percent on October 6.
Further, the MPC also decided that Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates are also left unchanged at 6.25 percent and 6.75 percent, respectively.
Das also “emphatically” re-iterated that MPC’s inflation target is 4 percent and not 2 to 6 percent. “Our aim is to align the inflation target to a durable basis, while supporting growth.”
“Global headline inflation is easing but rules above the target of many major economies. Sovereign bond yields have firmed up, US dollar has appreciated, and equity markets have corrected,” Das said in the press conference, adding that India is poised to become the new growth engine of the world.
On GDP growth, the MPC’s forecast for 2023-24 was left unchanged at 6.5 percent.
The overall tone of the bi-monthly monetary policy remained tilted towards the inflation fight. In the October MPC decision, Das said that CPI inflation forecast for 2023-24 left unchanged at 5.4 percent.
Das also mentioned that throughout the third quarter, food inflation pressure may not see sustained easing, while core CPI eased 140 basis points from its earlier peak in January.
The retail inflation fell to 6.83 percent in August as vegetable prices cooled compared to the previous month but it was still above the RBI’s tolerance band of 2-6 percent.
At 6.83 percent, the Consumer Price Index (CPI) inflation print was 61 basis points lower than July’s 15-month high of 7.44 percent. It was also the 47th month in a row that it stayed above the central bank’s medium-term target of 4 percent.
Most economists who had participated in a Moneycontrol poll early this week predicted a pause in the RBI policy. To counter inflation, the MPC has raised rates by 250 basis points (bps) since May 2022 but has kept the rates unchanged since the February review.