RBI Monetary Policy: MPC Holds Key Rates Ahead Of Lok Sabha Election, Repo Rate Stays At 6.5%

The Reserve Bank of India (RBI) for the seventh time in a row decided to hold key policy repo rate at 6.5%, highest since August 2018. The six-member monetary policy committee (MPC) also opted for continuation of "withdrawal of accommodation" stance to ensure that inflation progressively aligns to the target, while supporting growth.

Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

RBI's these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

The six-member MPC are Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, RBI governor Shaktikanta Das, and Prof. Jayanth R. Varma. MPC committee is led by RBI governor.

This is in-line with a GoodReturns.In poll of 45 economists who believed that RBI will hold rates on April 5, while maintaining policy stance.

RBI is an inflation trajectory central bank and its policy outcomes revolve around the movement in consumer price index (CPI).

Notably, India's consumer price index (CPI) inflation eased to 5.09% in February 2024, compared to 5.10% in the previous month. However, the latest inflation print was slightly below market expectations. Nonetheless, retail inflation stays below RBI's upper tolerance limit of 6% for the sixth consecutive month.

The spoilsport currently is the rising food prices and that has made RBI cautious.

Also, the latest RBI policy is ahead of the Lok Sabha Elections 2024 which will be held between April to May month.