- The Monetary Policy Committee (MPC) of the RBI, which met in Mumbai in December 2024, kept the Repo rate unchanged at 6.5% in a majority 4-2 decision. This is the eleventh consecutive monetary policy, over 22 months, which has left the Repo rate unchanged.
- The MPC has reduced the GDP growth forecast to 6.6% from 7.2% in the wake of the slowdown in the economy in the second quarter. However, as per Governor Das, the slowdown bottomed out in the second quarter, and has since then recovered – driven by festive demand and rural consumption.
- At the same time, MPC reduced the cash reserve ratio (CRR) by 50 basis points (bps) to 4%, providing adequate liquidity for lending requirements through FY25. The CRR cut indicates the RBI’s aim to address the sharp tightening of banking system liquidity arising from RBI’s FX operations as well as expected volatility in capital flows.
- The recent data released by the National Statistics Office (NSO) showed that the country’s real gross domestic product (GDP) slumped to a seven-quarter low of 5.4% in July-September 2024. This compares with a growth of 6.7% in the April-June 2024 quarter and 8.1% in the July-September 2023 period.
- The policy panel has hiked the inflation estimate for FY25 to 4.8% for the current fiscal from 4.5% projected earlier.
- Consumer price-based inflation (CPI), or retail inflation, surged to a 14-month high of 6.21% in October 2024, compared to 5.5% in September.
- The MPC had maintained a cautious posture, highlighting limited room to cut rates in the face of above-target inflation. The inflation level has remained much above the RBI’s tolerance level.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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