Reserve Bank of India (RBI) Governor Shaktikanta Das at the Monetary Policy Committee (MPC) meeting on Friday announced the policy rate unchanged at 6.5 per cent.

This was the first MPC meeting of the RBI for the Financial Year 2025, and this was the seventh consecutive time that the MPC decided to keep the repo rate unchanged.

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The MPC decided by 5 to 1 majority to keep the policy rate unchanged at 6.5 per cent. The committee also decided to maintain the withdrawal of accommodation stance.

“Since the last policy, the growth-inflation dynamics have played out favourably. Growth has continued to sustain its momentum surpassing all projections. Headline inflation has eased to 5.1 per cent during January and February 2024 from 5.7 per cent in December 2023, with core inflation declining steadily over the past nine months to its lowest level in the series,” he said.

Further, the RBI kept Marginal Standing Facility rate and bank rate constant at 6.75 per cent while the Standing Deposit Facility rate ws constant at 6.25 per cent.

The Governor said the CPI Inflation for the current year 2024-25 is projected at 4.5 per cent. CPI Inflation for Q1 2024-25 is projected at 4.9 per cent , Q2 at 3.8 per cent , Q3 at 4.6 per cent and Q4 at 4.5 per cent.

The six-member MPC led by Governor Das observed the impact of global headwinds on economic determinants such as India’s GDP growth and the inflation trajectory.

“As the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risks to inflation that might derail the path of disinflation. Under these circumstances, monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission of the past actions,” he said.

Real GDP growth has been projected at 7 per cent for 2024-25. Giving the quarterly GDP breakup, the Governor said the real GDP growth for Q1 2024-25 is projected at 7.1 per cent , for Q2 at 6.9 per cent , Q3 at 7 per cent and Q4 at 7 per cent, the risks are evenly balanced.

“The strong growth momentum together with GDP forecast for FY25 give us policy space to unwaveringly focus on price stability,” he said.

Strengthening of rural demand, moderation inflation and sustained momentum in manufacturing and services sector should boost investment and boost private capital expenditure, he added.

Further, he highlighted that the Current Account Deficit (CAD) for FY25 is expected to remain at a level that is both viable and eminently manageable.

Speaking on the global economic landscape, the Governor said the global economy has remained resilient with a stable outlook as reflected in various high frequency indicators.

“Global trade is expected to grow faster in 2024, although weaker than its historical average. Inflation is moving closer to targets, but the last mile of disinflation is turning out to be challenging. Services inflation in advanced economies remains sticky amidst tight labour markets.”

Accordingly, central banks are cautious in their communications, thereby tempering market expectations about the timing and magnitude of interest rate cuts later during this year. Equity markets have gained while bond yields and US dollar have remained volatile, he said.

The overall outlook is challenged by continuing geopolitical conflicts, disruptions in trade routes and high public debt burden.