RBI keeps repo rate unchanged at 6.5%

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• Oct 6, 2023 | Dhupali Das

Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Friday that the central bank's Monetary Policy Committee (MPC) has unanimously opted to...

Digital Desk: Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Friday that the central bank's Monetary Policy Committee (MPC) has unanimously opted to maintain the key repo rate at 6.5 percent, aligning with the expectations of economists.

This decision represents the fourth occasion on which the 6-member MPC has chosen to leave the key interest rates unchanged.

"After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC decided unanimously to keep the policy repo rate unchanged at 6.5 percent. Consequently, the standing deposit facility (SDF) rate remains at 6.25 percent and the marginal standing facility (MSF) and bank rate are at 6.7 percent," Das said.

Das added that five out of six members of the MPC decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.

Explaining the MPC's rationale behind the policy stance, Shaktikanta Das said the overall inflation outlook is "clouded by the uncertainties" from the fall in Kharif sowing for certain key crops like pulses and oil seeds, lower reservoir levels and volatile global food and energy prices.

"The MPC observed that the recurring incidents of large and overlapping food price shocks can impart generalization and persistence to headline inflation.

"Taking into account the evolving inflation growth dynamics and the cumulative policy repo rate hike of 250 basis points, which is still working through the economy, the MPC decided to keep the policy repo rate unchanged at 6.5 percent," Das said.

"The MPC remains highly alert to undertake timely policy measures, as may be necessary, in order to align inflation to the target and anchor inflation expectations," he added.

The decision to keep rates unchanged comes as the RBI seeks to strike a balance between supporting economic growth and curbing inflationary pressures amid global uncertainties. It reflects the central bank's commitment to maintaining stability in India's economic environment.