RBI Holds Repo Rate Steady at 6.5%, Decision Split 4:2

In the latest monetary policy committee (MPC) meeting, the Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 6.5%. RBI Governor Shaktikanta Das noted that a 4:2 majority made the decision and announced it.

The central bank also reaffirmed its commitment to withdrawing accommodation to curb inflation. “The MPC also decided to remain focused on the withdrawal of accommodation to ensure anchoring of inflation expectations and fuller policy transmission,” Governor Das stated during the press conference.

Additionally, the RBI maintained the standing deposit facility (SDF) at 6.25% and the marginal standing facility (MSF) and bank rates at 6.75%. This marks the eighth consecutive meeting where the repo rate has remained stable. 

Das emphasized the RBI’s dedication to aligning inflation with the 4% target, projecting it to hold at 4.5% for the current fiscal year, assuming normal monsoon conditions and balanced risks.

However, food inflation remains a concern. “While the MPC took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could derail the path of disinflation,” Das remarked.

He pointed out that CPI headline inflation softened in March and April, with vegetable prices on the rise. Retail inflation is expected to correct in the second quarter of the fiscal year. Das highlighted the importance of monitoring food inflation closely.

The RBI MPC meeting took place from June 5-7, marking the first such meeting following the 2024 Lok Sabha Election results.