October 9, 2023
- Following a thorough examination of the emerging macroeconomic and financial circumstances and outlook, it was decided to maintain the policy repo rate at 6.50 percent.
- RBI Governor Shaktikanta Das also emphasized measures to maintain inflation and increase market liquidity.
The rising global economic slowdown and unstable geopolitical situations are encouraging several central banks to take stricter and tighter actions to keep the economy afloat. The RBI Monetary Policy Committee (MPC) recommended no change in repo rates on October 6. The meeting was held with the RBI governor, and the decision was taken after extensive study and an outlook on the current economic situation within the nation’s economy.
RBI Governor Shaktikanta Das said, “The need of the hour is to remain vigilant and not give room to complacency. Lessons from the past one and a half decades and from living through the global financial crisis and the taper tantrum tell us that risks and vulnerabilities can grow even in good times. All stakeholders in the economy, be it lenders, corporates, businesses – small and big, and even policymakers, should continue to reinforce their buffers and fundamentals in the fast-changing world that we live in.”
RBI’s MPC Decisions and Considerations
In a recent meeting held from October 4th to 6th, 2023, the Monetary Policy Committee (MPC) carefully evaluated the prevailing macroeconomic and financial conditions, as well as the economic outlook. Following a unanimous decision, the MPC has opted to maintain the policy repo rate at a steady 6.50 percent. Consequently, this decision keeps the standing deposit facility (SDF) rate unchanged at 6.25 percent, while the marginal standing facility (MSF) rate and the bank rate will continue to be set at 6.75 percent.
Furthermore, the RBI Monetary Policy Committee has adopted a forward-looking approach, with a majority vote of 5 out of 6 members in favor, to prioritize the gradual withdrawal of monetary accommodation. This strategic move aims to facilitate a controlled alignment of inflation with the designated target while concurrently fostering economic growth.
Unchanged Repo Rate
A careful analysis of economic factors was conducted in the latest meeting of the MPC. It was noted that persistent and sizable fluctuations in food prices, often overlapping, have the potential to contribute to a continued and widespread increase in headline inflation. Overall, economic activity has displayed resilience despite these challenges. In light of the evolving dynamics between inflation and economic growth and considering the cumulative policy repo rate hike of 250 basis points that is still in the process of permeating the economy, the MPC has made the decision to maintain the policy repo rate at its current level of 6.50 percent. This decision reflects a deliberate approach to monitor and assess the ongoing transmission of the aforementioned 250 basis points increase in the policy repo rate to bank lending and deposit rates, which is yet to be fully realized. As such, the RBI Monetary Policy Committee remains committed to the objective of gradually withdrawing accommodation from the financial system.
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