Reserve Bank keeps repo rate at 6.50%

The Reserve Bank of India on Friday left the policy repo rate unchanged at 6.50 per cent, signalling focused intent on achieving the mediumterm target for consumer price index (CPI) inflation of 4 per cent, while supporting growth, which is seen at a potential 7.2 per cent in FY25.

"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 possibly derail the path of disinflation. Hence, monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4.0 per cent on a durable basis. Sustained price stability would set strong foundations for a period of high growth," RBI Governor Shaktikanta Das said in his statement.

This is the 8th consecutive time the RBI has left policy rates unchanged. "Dovish commentary by the RBI and hike in FY25 GDP growth forecast boosted market sentiment" said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.

The RBI status quo on repo rate is in sync with the assessment of the Monetary Policy Committee (MPC) that there is need to continue with the disinflationary stance, until a durable alignment of the headline CPI inflation with the target is achieved. The RBI decision of status quo on policy rates and projection of a higher growth rate for Indian economy follows the MPCs review of the current and evolving macroeconomic situation which shows global economic activity rebalancing and poised to grow at a stable pace in 2024, inflation which is moderating unevenly and uncertainty on the pace and timing of policy pivots by central banks keeping financial markets volatile.