Reserve Bank of India Maintains Repo Rate at 6.5% for the Fifth Consecutive Time Amid Strong Economic Growth

With an emphasis on taking a cautious approach to inflation, the Reserve Bank of India (RBI) declared on Friday that it will keep the repo rate at 6.5% for the fifth time in a row.

Shaktikanta Das, the governor of the RBI, said, “The Reserve Bank of India’s Monetary Policy Committee, following a thorough evaluation of evolving macroeconomic developments, has unanimously chosen to keep the repo rate unchanged at 6.5%.” This decision is made against the backdrop of India’s unexpectedly strong economic development.

RBI repo rate

The repo rate is the interest rate at which the RBI lends to commercial blanks.

The Reserve Bank of India’s dedication to maintaining stability highlights its prudent stance under changing economic circumstances. The central bank seeks to manage possible inflationary pressures while bolstering the trajectory of the economy as a whole by maintaining a stable repo rate.

The RBI had raised the repo rate by a total 250 basis points (bps) since May 2022 in efforts to cool surging inflation, which dropped to a four-month low of 4.87% in October, but is expected to remain above the RBI’s 4% medium-term target for some time.

“The moderation in retail inflation in October to 4.87% from June’s high of 7.4%, has been broad based. The near-term outlook however is marked by food inflation pressures which may show up in November as well as December. Against this backdrop, the MPC remains highly alert and prepared to take appropriate actions as necessary,” Mr. Das said.

The MPC also decided by a majority of 5:1 to remain focused on the withdrawal of accommodation to ensure that inflation aligns to the target, while supporting growth.

“The emerging market economies have remained resilient during the current bout of volatility unlike previous episodes. While headline inflation has receded from recent highs, it remains high in several economies and core inflation remains sticky. Against this unsettled global environment, the Indian economy represents a picture of resilience and momentum,” Mr. Das added.

India’s economy grew 7.6% in the July-September quarter, much faster than the polled median of 6.8% and RBI’s estimate of 6.5%, helped by government spending and manufacturing, raising bets that Asia’s third-largest economy will outperform its own estimates for the full year.

The central bank projected the Consumer Price-based Inflation (CPI) based retail inflation at 5.4% for the current fiscal.

The MPC meeting took place against the backdrop of inflation declining to 4.87%t in October. The November print of inflation is expected to be released next week.