The Reserve Bank of India's Monetary Policy Committee voted by a 5-to-1 majority on Wednesday to keep the benchmark policy repo rate unchanged at 6.50 percent for the tenth consecutive bi-monthly meeting, while unanimously shifting its policy stance from 'withdrawal of accommodation' to 'neutral'.
The landmark shift in stance marks the first modification in the central bank's policy orientation since June 2022, signaling increased operational flexibility and opening the door for potential interest rate cuts in upcoming quarters as global monetary conditions loosen.
Tenth Consecutive Pause and Unanimous Pivot to Neutral
Announcing the resolution in Mumbai, RBI Governor Shaktikanta Das stated that the Indian economy remains in a sweet spot of high growth and moderating core inflation, though persistent food price volatility continues to require careful watch to anchor household inflation expectations.
The MPC maintained its real GDP growth forecast for the 2024-25 financial year at 7.2 percent, supported by buoyant domestic consumption, expanding manufacturing activity, and sustained government capital expenditure on national infrastructure.
“The shift in stance to neutral provides greater flexibility to the MPC to monitor evolving inflation and growth dynamics while maintaining our focus on durably aligning inflation to the four percent target.” — Shaktikanta Das, Governor of the Reserve Bank of India
Growth Projections Robust Despite Food Price Pressures
Retail inflation for the current fiscal year was projected at 4.5 percent, with Governor Das noting that while food price shocks have created headline inflation bumps, non-food non-fuel core inflation has softened to historic lows around 3.4 percent.
Financial markets reacted positively to the announcement, with domestic equity benchmarks BSE Sensex and NSE Nifty climbing alongside falling sovereign bond yields as investors priced in an increased likelihood of policy easing by early 2025.
Frequently Asked Questions
What does RBI's shift to a neutral stance mean for borrowers?
A neutral stance means the RBI is equally open to rate cuts or holds, signaling that interest rate hikes have concluded and future cuts are possible.
What is the RBI's economic growth projection for India?
The central bank projected India's real GDP growth at 7.2 percent for fiscal year 2024-25, backed by robust private consumption and investment.
Comments (0)
Log in to join the discussion.