RBI Monetary Policy Announcement: The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced the second bi-monthly monetary policy of the financial year 2024-25. The RBI Governor said that the Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. RBI raised its GDP growth forecast for FY25 to 7.2 per cent from 7 per cent earlier. The central bank retained the FY25 inflation forecast at 4.5 per cent.
This is the second meeting of the RBI MPC after the new financial year FY2025 started from April 1 and the third meeting of 2024 after the February Policy meeting held between February 6-8. The Monetary Policy Committee invariably meets for 3 days before announcing its decision at the end of the 3-day period. The next RBI MPC meeting is scheduled on August 6. The MPC is required to meet at least four times in a year.
Overall the current account deficit is expected to remain well within its sustainable level in FY25
RBI Governor Shaktikanta Das, in his monetary policy speech, said that the central bank transferred Rs 2.11 lakh crore to the union government as dividend. He added that the central board decided to keep the contingent reserve buffer of 6.5 per cent. This risk provisioning of CRB will further strengthen RBI’s balance sheet, he said.
RBI Governor reiterated that Fed matters but “RBI action is primarily dependent on domestic growth and inflation conditions and overall outlook. “
RBI Governor says: “Uncertainties related to food inflation need to be monitored. Need inflation reduction to 4% level on a durable basis while supporting growth.”
RBI Governor says: ‘The development with respect to growth and inflation are unfolding as per expectation. When the projected growth of 7.2% for FY25 materialises, it will be the fourth consecutive year of growth at or above 7% for India.”
“Headline CPI continues to be on a disinflationary trajectory. Monetary Policy has played a key role. Between Q4FY24 and Q1FY25, headline inflation has declined by 2.3 percentage points. Repeated food price shocks slowed down the overall decline in inflation.”
RBI Governor Shaktikanta Das said that the headline inflation continues to be in a disinflation trajectory. The MPC decided to keep inflation projection for FY25 unchanged at 4.5%. The RBI projects CPI inflation for Q1FY25 at 4.9%, Q2FY25 at 3.8%, Q3FY25 at 4.6%, and Q4FY25 at 4.5%.
Real GDP growth for FY25 projected at 7.2%, up from 7% earlier.
Food inflation still big worry for RBI; The Governor said the forecast of above normal monsoon augurs well for the Kharif Crop outlook.
Assuming a normal Monsoon – CPI for FY25 projected at 4.5%
RBI MPC Meet 2024 Live: RBI Governor said that the central bank is committed to bring inflation back to target of 4% on a durable basis.
Real GDP growth for FY25 projected to be 7.2%
Q1FY25 growth seen at : 7.3%
Q2FY25 growth seen at : 7.2%
Q3FY25 growth seen at : 7.3%
Q4FY25 growth seen at : 7.2%
The risks are evenly balanced as per RBI
RBI Governor Shaktikanta Das announced that the MPC decided to keep the stance of ‘withdrawal of accommodation’.
He said that the MSF and SDF rates remained unchanged at 6.75% and 6.25% respectively.
RBI says growth momentum maintained- NSO’s real GDP growth at 8.2% for FY24; FY25 has shown domestic growth resilience. Healthy growth in 8 core industries in April. Manufacturing and services indicate buoyant economic activity.
RBI To remain focussed on withdrawal of accommodation to ensure inflation continues to moderate to RBI’s target levels and ensure anchoring of inflation expectation and fuller transmission.
RBI Governor Shaktikanta Das said that the MPC has decided to keep the policy repo rate unchanged at 6.50 per cent.
“Need to remain vigilant in an unsettled global environment,” said Shaktikanta Das.
RBI Governor Shaktikanta Das begins monetary policy speech.
“The RBI Monetary Policy Committee (MPC) is likely to keep the repo rate unchanged at 6.5 percent as rise in food prices continues to pose a threat to inflation. While an immediate rate cut may not be on the radar, the potential reduction in the rates are likely to happen later in the year – maybe sometime around October this year. Forecasts regarding inflation might be revised down slightly, while growth predictions regarding GDP are expected to remain stable.”
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India‘s foreign exchange reserves witnessed a decline of USD 2.027 billion, reaching USD 646.673 billion by the end of the week concluding on May 24, according to data released by the Reserve Bank. The previous week had seen a remarkable surge, with the reserves hitting a high of USD 648.7 billion.
RBI to announce its decision on Policy Rates in just a short while. RBI has kept repo rates unchanged at 6.50% for over a year now
“With the still-robust growth outlook creating no urgency to cut rates and inflation still above target, driven mainly by food, we expect the MPC to vote 5-1 to keep the policy settings unchanged. We do not expect the majority of the MPC to see a reason to cut before December.”
“RBI is expected to keep the policy repo rate unchanged in the ensuing MPC meeting as retail inflation still remains above the target of 4 per cent.
Though inflation has started receding, the macros would become clearer only after the monsoon season plays out in September.
To get a sustainable balance between cyclical consumption driven growth and inflation, Investment growth to propel supply side is key. Private more than government. Something to closely watch.
In a way, RBI is following the right path for a sustainable economic growth, with a resolve to fight inflation.”
“The recent inflation data and the outlook for prices of food and commodities had suggested a status quo on the rates and stance in the upcoming June 2024 monetary policy review. This has been further cemented by the higher-than-forecast expansion in the Indian economy in Q4 FY2024, which led to the full year GDP growth printing above 8%. As a result, the likelihood of a stance change in August 2024 followed by a rate cut in October 2024 has eased, unless an abundantly well distributed monsoon quells food prices in a sustainable fashion.”
“MPC is expected to continue with its firm commitment to focus on 4% goal post for CPI securing using appropriate monetary policy tools. During the last few months, RBI has actively managed the banking system liquidity to calibrate monetary conditions despite stable policy rates. The resilience of GDP growth backed by sustained momentum in domestic demand conditions, is providing the space to defer the start of the easing cycle staying focused on inflation.
At the backdrop of the fragile outlook for the global economy amidst stalling in the descent of inflation and thus reigniting risks to global financial stability, MPC is expected to hold policy rates for a foreseeable future going ahead with a likelihood of starting rate easing cycle in last quarter of current calendar year. Favourable monsoon impact on the food inflation trajectory will have a major influence on the commencement of the easing cycle.”
“The RBI is expected to maintain its current stance. Although the CPI inflation declined to 4.83% from the previous month’s 4.85%, food inflation remains stubbornly high at 8.7%. As a result, RBI is likely to maintain the status quo until inflation is brought within the target range of 4% +/- 2%. Other challenges include extreme weather conditions, stock market volatility, and geopolitical tensions.
It is likely to be a non-event for the Markets. The market will focus on the inflation and GDP forecast of FY25, a reduction in inflation and increase in GDP trajectory will be taken positive. However the chance is low in this policy rather than in the next policy as the new coalition structure, monsoon and FDA policy is reviewed.”
The announcement by RBI MPC today follows closely on the heels of Lok Sabha Elections Results wherein BJP failed to get a clear majority and is now compelled to form a coalition government. Analysts and economists believe that the government push towards supply-side reforms may continue but tougher reforms like UCC, land reforms and the like might hit a speed breaker.
The Reserve Bank of India has stayed on hold for entire FY24 and repo rates remain unchanged at 6.50%
According to RBI Governor Shaktikanta Das afer the Policy Announcement in April, RBI continues to remain 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. The MPC will remain resolute in its commitment to aligning inflation to the target. “