MUMBAI: The Reserve Bank of India (RBI) on Thursday left the repo rate unchanged for the third time in a row but adopted a hawkish tone as inflation surged due to spike in the prices of food items. The six-member Monetary Policy Committee (MPC) of the RBI, which is headed by Governor Shaktikanta Das, unanimously chose to maintain the benchmark repo rate at 6.5% and retained its stance of withdrawal of accommodation.
High food items compelled the central bank to revise its inflation projection upward to 5.4% for the current fiscal year from the earlier projection of 5.1%. Announcing the bi-monthly monetary policy, Governor Shaktikanta Das said that the central bank will remain watchful of the inflation and remains resolute in its commitment to align inflation to the targeted level.
“Considering this confluence of factors, the MPC decided to remain watchful and evaluate the emerging situation. Consequently, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent with preparedness to act, should the situation so warrant. The MPC remains resolute in its commitment to aligning inflation to the 4 percent target and anchoring inflation expectations,” said Das on Thursday.
Headline inflation, after reaching a low of 4.3 percent in May 2023, rose in June to 4.8 percent and is expected to surge during July-August led by vegetable prices. According to governor, the vegetable price shock may reverse quickly, but possible El Nino weather conditions along with global food prices need to be watched closely against the backdrop of a skewed south-west monsoon so far.
“Going by the past trends, vegetable prices may see a significant correction after a few months. The prospects of kharif crops have brightened, thanks to improvement in the progress of the monsoon. Uncertainties, however, remain on domestic food price outlook due to sudden weather events and possible El Nino conditions in August and beyond,” said the governor. “Bringing headline inflation within the tolerance band is not enough; we need to remain firmly focused on aligning inflation to the target of 4 percent,” he added.
RBI’s fight to tame inflation
Announcing the bi-monthly monetary policy, Governor Shaktikanta Das said that the central bank will remain watchful of the inflation and remains resolute in its commitment to align inflation to the targeted level. High food prices compelled RBI to revise its inflation projection upward to 5.4% for the current fiscal year from the earlier projection of 5.1%.
6.5% Repo rate left unchanged by the RBI
5.4% Revised inflation outlook for the current financial year
5.1% Earlier projection for inflation for the current financial year
6.5% RBI’s GDP growth projection for the current fiscal