August 8, 2024

New Delhi, India

RBI Monetary Policy

In its latest monetary policy announcement, the Reserve Bank of India (RBI) has kept its inflation projection for FY2025 unchanged at 4.5%. RBI Governor Shaktikanta Das provided insights into the factors influencing this forecast and the broader economic conditions. The Indian rupee showed a slight recovery from its record low, opening 2 paise higher at 83.94 per dollar on Thursday ahead of the Reserve Bank of India’s (RBI) monetary policy announcement.

Inflation Projections:

• FY2025 Inflation Forecast: 4.5%
• Quarterly Breakup:
  • Q2 FY25: 4.4%
  • Q3 FY25: 4.7%
  • Q4 FY25: 4.3%
  • Q1 FY26: 4.4%

Factors Influencing Inflation:

• Headline Inflation: Rose to 5.1% in June 2024, driven by unexpected food price increases.
• Food Inflation: Contributed significantly, accounting for over 75% of headline inflation in May and June, with vegetable prices alone contributing about 35% of June’s inflation.
• Fuel: Remained in deflation for the 10th consecutive month.
• Core Inflation: Reached a historic low in May and June, showing broad-based softening, especially in core services.

Economic Outlook:

• Macroeconomic Conditions: Stable with balanced inflation and growth.
• Growth Resilience: Continues to be strong despite inflationary pressures.
• Monetary Policy Stance: Aims to ensure inflation moves sustainably towards the target while supporting growth.

Governor’s Remarks: RBI Governor Shaktikanta Das emphasized the need for vigilance in maintaining price stability amid persistent supply-side shocks, particularly in food items. He highlighted the progress made in achieving price stability but acknowledged ongoing challenges.

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) announced on Thursday that the repo rate will remain unchanged at 6.5% for the ninth consecutive time. The decision was made during the MPC’s bi-monthly meeting, with RBI Governor Shaktikanta Das revealing the outcomes.

Repo Rate Decision:

• Current Repo Rate: 6.5%
• Number of Consecutive Unchanged Decisions: 9
• Decision Details: The MPC’s decision to keep the repo rate unchanged was unanimous.

Governor’s Statement: RBI Governor Shaktikanta Das stated, “We are seeing a good amount of convergence between market expectations and RBI policies; they are well aligned.” He emphasized the MPC’s majority decision (4:2) to retain the withdrawal of the accommodation stance.

RBI Monetary Policy: Central Bank Maintains FY25 Real GDP Growth Projection at 7.2%

The Reserve Bank of India (RBI) has kept its real GDP growth projection for FY25 steady at 7.2%. For Q1 FY25, the GDP growth target was revised down to 7.1% from 7.3%. The forecasts for Q2 and Q4 FY25 remain unchanged at 7.2%, while Q3 FY25 is projected to grow at 7.3%.

In its June monetary policy update, the RBI raised the real GDP growth forecast for FY25 from 7% to 7.2%. This follows a robust GDP growth of 8.2% in FY24, which exceeded analysts’ expectations.

Looking ahead, the RBI projects a GDP growth of 7.2% for Q1 FY26.