RBI Keeps Repo Rate Unchanged at 6.5%
On Thursday, February 7, 2024, the Reserve Bank of India (RBI) set the repo rate at 6.5 percent. The current repo rate has remained unchanged for the sixth time in a row. This decision was made during the three-day monetary policy committee of the RBI, which began on Monday, February 6, 2024, and ended on Thursday, February 8, 2024. Many important decisions have been made during this committee, including the decision to remain at the same repo rate. The increase in interest rate, known as the repo rate cycle, was stopped in April last year after six straight rate hikes totaling 250 basis points over the last two years.
Shaktikanta Das, the governor of the RBI, said, “The Monetary Policy Committee (MPC) also decided by a majority of 5 out of 6 members to remain focused on the ‘Withdrawal of Accommodation’ to make sure that inflation progressively aligns with the target while supporting growth.” The RBI governor further added during the announcement of the bi-monthly monetary policy that the committee will keep on monitoring food inflation so that the benefits that are gained will not get slowly wasted. It is worth noting that it is the first bi-monthly policy after the presentation of the Interim Budget 2024 that happened on February 1, 2024.
The RBI governor said Regarding inflation, the speed of disinflation, which is driven by the decrease in core inflation, is being disrupted by significant and recurring shocks to food prices. The main causes of inflation’s upside risks are changes in global financial markets, supply chain disruptions brought on by geopolitical events, and commodity prices. The economy is still being affected by the policy repo rate hikes cumulatively, he stated.
The central bank governor further states that “global growth is expected to remain steady in this year as well (2024), with heterogeneity across regions. Though global trade momentum remains weak, it is exhibiting signs of recovery and is likely to grow faster in 2024. Inflation has softened considerably and is expected to moderate further in 2024.” It is worth noting that, in the previous meeting of MPC that happened on December 8, 2023, the Reserve Bank of India had not made any changes to the repo rate consecutively for the fifth time. The RBI Governor had increased the growth projection to 7 percent for the present financial year from 6.5 percent.
What Is The Repo Rate
Many of you are surely keen to know what the repo rate is and why it is important to take a decision on it. The repo rate is basically the rate of interest at which the central bank lends money to commercial banks. In other words, the repo rate is the rate of interest at which the Reserve Bank of India (RBI) lends money to commercial banks or financial institutions in India against government securities. The decision on the repo rate is usually made during bimonthly meetings. This meeting is typically held six times in a financial year, during which the members of the committee decide interest rates, inflation outlook, money supply, and numerous macroeconomic indicators. As of now, no changes or increases have been made in the repo rate, so it will not have an impact on loan EMIs.
