The monetary policy committee led by Shaktikanta Das has kept the repo rates unchanged at 6.50 per cent for the sixth straight time. The rate increase cycle was paused in April last year after six consecutive rate hikes totaling 250 basis points since May 2022.
"The MPC also decided by a majority of five out of six members to remain focused on the ‘Withdrawal of Accommodation’ to ensure that inflation progressively aligns with the target while supporting growth," said RBI Governor Shaktikanta Das.
RBI Governor Shaktikanta Das, while announcing the bi-monthly monetary policy, said that the Monetary Policy Committee (MPC) will remain watchful of food inflation so that the benefits gained are not frittered away. This is the first bi-monthly policy following the presentation of the Interim Budget 2024-25 last week.
"On the inflation front, large and repetitive food price shocks are interrupting the pace of disinflation that is led by the moderation of core inflation. Geopolitical events and their impact on supply chains, volatility in international financial markets, and commodity prices are key sources of upside risks to inflation. The cumulative effect of policy repo rate increases is still working its way through the economy," he said
In December, Consumer Price Index (CPI) inflation, or retail inflation, increased, reaching a four-month high of 5.69 per cent. The increase was primarily attributed to the elevated prices of various food items, including pulses, spices, fruits, and vegetables. Comparatively, in November 2023, CPI inflation stood at 5.55 percent.
"Assuming a normal monsoon next year, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 5.0 per cent; Q2 at 4.0 per cent; Q3 at 4.6 per cent; and Q4 at 4.7 per cent. The risks are evenly balanced," the Governor said.
"The MPC will remain resolute in its commitment to aligning inflation to the target," he added.
Despite this recent rise, headline inflation has managed to fall within the 2-6 percent range stipulated by the government for the Reserve Bank of India (RBI). However, it still exceeds the central bank's target of 4 per cent.
The RBI has projected CPI inflation for the fiscal year 2023-24 (FY24) at 5.40 per cent and 5.60 per cent for 2024-25.
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