RBI Monetary Policy: Tenth Time A Charmer? Repo Rate Stays At 6.5% Amid Middle East War, Stance To Neutral

The Reserve Bank of India kept key interest rates of the country, unchanged for the tenth time in a row, on Wednesday, October 9, 2024. The decision received majority votes from six-member MPC, with 5:1. However, RBI turned dovish, by changing monetary policy stance to 'Neutral' from earlier hawkish outlook of 'Withdrawal Of Accommodation'.

Accordingly, the policy repo rate under the liquidity adjustment facility (LAF) is unchanged at 6.50 per cent.

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.

MPC's decision to turn Neutral in policy stance is to ensure that inflation progressively aligns with the target, while supporting growth.

Notably, 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.

Six-member MPC met between October 7 to October 9, before announcing the outcomes.

RBI's policy decision is amidst global economic uncertainties as concerns of supply chain disruption due to geopolitical uprising in the Middle East, with Israel at war with Hamas and Hezbollah, and an airstrike riff-off with Iran.

Also, RBI continues to defy the rate cut cycle by global central banks, especially of US Federal Reserve which last month made a bold and aggressive rate cut by 50 bps in fund rates.