RBI keeps repo rate unchanged at 6.5%, pegs FY25 GDP growth at 7 percent

"After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the Monetary Policy Committee (MPC) decided by a 5 to 1 majority to keep the policy repo rate unchanged at 6.5 per cent.

"Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the bank rate are at 6.75 per cent," said RBI Governor Shaktikanta Das while making the bi-monthly monetary policy statement.

The MPC also decided, by a majority of 5 out of 6 members, to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.

Sharing the rationale for the MPC decisions, the RBI Governor said that momentum in the domestic economy continues to be strong, and headline inflation, after moderating to 4.9 per cent in October last year, rose to 5.7 per cent in December 2023.

"This was primarily due to food inflation, mostly vegetables. The softening in core inflation (CPI inflation excluding food and fuel) continued across both goods and services, reflecting the cumulative impact of monetary policy action as well as the significant softening in commodity prices.

"The uncertainties in food prices, however, continued to impinge on the trajectory of headline inflation. Taking into account this growth-inflation dynamics and the fact that transmission of the cumulative 250 basis points policy rate hike is still underway, the MPC decided to keep the policy repo rate unchanged at 6.5%," Shaktikanta Das said.

He further said MPC will carefully monitor any signs of generalisation of food price pressures, which can fritter away the gains in easing core inflation.

"Monetary policy must continue to be actively disinflationary to align inflation to the target of 4 per cent on a durable basis. The MPC will remain resolute in this commitment," Das said.

The RBI has projected consumer price index (CPI)-based retail inflation for the next financial year (2024–25) at 4.5 per cent. The Indian economy is expected to register 7 per cent growth in FY25, as per the RBI estimate.