RBI MPC meet in June: RBI keeps repo rate unchanged at 6.50%

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Thursday said the repo rate will be unchanged at 6.5 per cent. This is for the second time that the central bank has kept the basic rate unchanged. Governor Shaktikanta Das said the MPC voted unanimously to leave the repo rate unchanged.

At the last MPC meeting in April, the RBI paused its rate hike cycle and stayed with the 6.5 per cent repo rate. Prior to that, the central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.

RBI's Monetary Policy Committee voted unanimously in favour of maintaining a status quo on interest rates. It voted in a 5:1 majority on the withdrawal of accommodation to ensure inflation aligns with the target while focusing on growth, Governor Shaktikanta Das said on Thursday. 

"The MPC has raised repo rates by 250 basis points since May last year, the effects of which will be seen in the coming months," Governor Das said while explaining the rationale behind keeping policy rates unchanged.

"MPC decides to keep repo rate unchanged at 6.5 per cent, Standing Deposit Facility Rate remains at 6.25 per cent. Marginal Standing Facility Rate and Bank Rate unchanged at 6.75 per cent," said Das on Thursday.

Watch: RBI MPC meet Outcome: Repo rate unchanged; check inflation, e-RUPI, RuPay cards announcements, and more

While announcing the decision, Das also signalled the central bank’s readiness to act in keeping with the incoming data. 

He added: "We can derive satisfaction from the fact that the Indian economy stands out as strong and resilient. We are acutely aware that global policy normalisation is not over."

The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. It said that a majority of five out of six members remain focused on the withdrawal of accommodation.

Headed by Reserve Bank Governor, a meeting of the six-member Monetary Policy Committee (MPC) was held from June 6-8. 

Other members of the committee are Dr Shashanka Bhide, Honorary Senior Advisor, National Council of Applied Economic Research, Dr Ashima Goyal, Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai, Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad, Dr Rajiv Ranjan, Executive Director, Dr. Michael Debabrata Patra, Deputy Governor in charge of monetary policy.

RBI on inflation

The Reserve Bank of India has cut the inflation aim to 5.1 per cent from 5.2 per cent forecast in April policy. Q1 inflation seen at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent, and Q4 at 5.2 per cent.

"The MPC took note of the moderation in CPI headline inflation in March-April into the tolerance band, in line with projections, reflecting the combined impact of monetary tightening and supply augmenting measures. Headline inflation is projected to decline in 2023-24 from its level in 2022-23 but would still be above the target, warranting continuous vigil," the RBI said. 

Also read: RBI MPC LIVE updates: Repo rate unchanged at 6.5%, GDP growth for FY2023-24 pegged at 6.5%, says Shaktikanta Das

"RBI staying on a pause and maintaining its stance was in line with expectations. The RBI remains cautious on the inflation trajectory especially as inflation will remain above the 4% target for the foreseeable future.  The RBI continues to estimate average inflation slightly above 5% for FY2024 and retained GDP growth at 6.5%. We believe there are some downside risks to growth. We believe that rate cuts will be contingent on significant divergence in growth-inflation prospects. We maintain our call that the RBI will be on an extended pause," said Suvodeep Rakshit, senior economist, Kotak Institutional Equities. 

"The MPC expectedly continued with the rate pause as the inflation prints have come well within the tolerance band of 2 to 6% and growth concerns persist. The stance has been kept as withdrawal of accommodation as that is the signalling the RBI wants for keeping the inflationary expectations anchored. The FY24 growth rate projection of 6.5% is more on the optimistic spectrum band as the number of downside risks listed are quite a many. The projected growth rate for Q1 at 8% in FY24 is likely to get tested despite the holding up of demand in the first two months of the year," said Ranen Banerjee, Partner, Economic Advisory Services, PwC India.

“The RBI is reminding of batting legend Sunil Gavaskar. Standing without fear in front of a challenging global environment. Taking a fresh stance after scoring a century on a challenging wicket to reassure everyone that Mai Hoon Na. Indian economy is ideally balanced between Growth and Inflation under the RBI’s navigation. Market will be pleasantly surprised if the GDP growth for FY 24 comes as per the expectations of the RBI at 6.5%,” said Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company.

"By keeping interest rates steady, the RBI has exhibited its commitment to strike a delicate balance between addressing inflation concerns and supporting businesses and individuals in these challenging times. We believe that this decision will provide much-needed stability to the financial ecosystem, allowing us to plan and execute our strategies effectively. We remain optimistic about the future, as this decision sets the stage for a conducive environment for businesses to thrive, invest, and contribute to India’s economic growth," said Adhil Shetty, CEO, Bankbazaar.com 

"The RBI's decision to hold rates steady is a sensible choice given the current global and local economic conditions. We appreciate the Governor's candid acknowledgment of the uncertainties and potential conflicts in the global scenario, yet also his positive reiteration of the strength of our domestic economy and resilience of the banking sector. India's economic rebound, as indicated by surpassing pre-pandemic GDP levels by over 10%, and easing inflation are promising signs. The RBI's preparedness to adjust policy rates in response to the evolving macroeconomic situation highlights its commitment to maintain price stability and ensure a sustained growth trajectory. However, we must remain vigilant of factors such as El Nino and global inflation trends that could potentially disrupt our progress," said Sonam Srivastava, Founder at investment advisory firm Wright Research.