Mumbai: The Reserve Bank of India on Friday decided to keep policy rate unchanged for the seventh time in a row and said that it remains vigilant towards upside risks to food inflation. The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.
Announcing the first bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent. He said MPC will remain watchful of food inflation.
The six-member rate-setting panel by a majority vote of 5:1 favoured the status quo on interest rate, while maintaining focus on withdrawal of accommodative stance. In February, the Consumer Price-based Inflation (CPI) stood at 5.1 per cent. The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
The Reserve Bank also retained inflation projection at 4.5 per cent for the current financial year, lower than 5.4 per cent in the last fiscal. Assuming a normal monsoon this year, CPI (consumer price index-based) inflation for the current year is projected at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.
Reserve Bank Governor Shaktikanta Das also stressed on the need to remain vigilant on food prices, given the forecast of higher temperatures between April-June. He also said that the impact of reduction in fuel prices on inflation will deepen in the coming months. Das, however, said the elephant (inflation) seems to have gone for a walk and RBI wants it to remain in the forest.
The central government has tasked the Reserve Bank of India (RBI) to ensure that the Consumer Price Index (CPI) based inflation remains at 4 per cent, with a margin of 2 per cent on either side. The retail inflation was 5.1 per cent in February. March inflation print is scheduled to be released next week.
