New Delhi, October 09, 2024
The Reserve Bank of India’s (RBI) newly reconstituted Monetary Policy Committee (MPC), which met from October 7-9, on Wednesday kept the key policy rate – repo rate – unchanged at 6.5 per cent for the tenth consecutive monetary policy review.
While the six-member MPC changed the monetary policy stance from ‘withdrawal of accommodation’ to ‘neutral’ in the policy meeting, the panel kept the retail inflation and GDP growth forecasts unchanged at 4.5 per cent and 7.2 per cent for FY2025 respectively.
The RBI’s policy panel kept the Repo rate steady in a 5:1 majority decision. New MPC Member Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development, voted to reduce the Repo rate by 25 basis points.
While the stance was changed to neutral, the RBI still retains a hawkish tilt by indicating that they would remain watchful on inflation and be “unambiguously” focused on durably aligning inflation to the 4% mark. What the stance change thus means is that the RBI sees a possibility forming for a rate cut but would still want to keep a close watch on shifting risk perspectives and its consequent impact on India inflation – both higher and lower, said Indranil Pan, Chief Economist at Yes Bank.
“The RBI’s shift to a ‘neutral’ stance marks a pivotal step in its approach, providing more flexibility in navigating the evolving economic conditions. With food inflation easing and the monsoon being favorable, this change signals optimism for India’s inflation outlook. Globally, trends such as the US Federal Reserve’s rate cut and easing monetary policies further support this shift. By adopting a more neutral position, the RBI is positioning itself to respond dynamically to future developments, while continuing to foster economic stability and long-term business confidence.”Said Anu Aggarwal, Head of Corporate Banking, Kotak Mahindra Bank
“RBI’s decision to hold rates while changing the stance to neutral is completely in line with our expectations. The tone of the Governor remains fairly balanced keeping further decisions data dependent. We continue to expect the onset of rate easing from December with a 25bps cut but the scale of easing in this cycle is expected to be shallow with limited scope for back-to-back easing in each policy. Said ” Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
