The Reserve Bank of India (RBI) announced its decision on key policy rates today following the conclusion of its three-day Monetary Policy Committee (MPC) meeting headed by Governor Shaktikanta Das.
The RBI lowered its inflation forecast for the financial year 2023-24 to 5.1 per cent from an earlier estimate of 5.2 per cent.
“A durable disinflation in core inflation would be critical for a sustained alignment of the headline inflation with the target. CPI inflation forecast for 2023-24 cut to 5.1% from 5.2%,” Governor Das said.
The RBI decided to keep its key policy rate unchanged at 6.5% for the second consecutive time. The decision was taken as inflation has moderated in recent months.
The RBI started raising interest rates in May 2022 in an effort to control inflation. Since then, the RBI has raised the repo rate by 250 basis points in six consecutive hikes.
The Governor said that even though inflation is softening, the rate being within the 6% threshold is not enough. He added that the inflation rate still remains above the RBI’s 4% target and the annual inflation rate is expected to be at 5.1% in FY24.
Retail inflation has remained below the RBI’s target of 6 per cent for the past two months, Governor Das said, adding that the GDP growth in Q1 this financial year is expected at 8 per cent. The retail inflation rate has been above 4% since 2021 and was above 6% from January to October 2022. But in April, it fell to an 18-month low of 4.7%.