RBI hits pause, keeps repo rate unchanged at 6.5%

The Reserve Bank of India (RBI) on Thursday decided to keep policy repo rate unchanged at 6.5% in a clear move to give priority to financial stability and economic growth, but firmly underlined that the “war against inflation has to continue”.

RBI Governor Shaktikanta Das said the decision to keep the policy rates unchanged is “a pause, not a pivot”.

“Let me emphasise that the decision to pause on the repo rate is for this meeting only,” Das said, alluding that the central bank would resume policy rate hike if inflationary pressure continued.

The Monetary Policy Committee (MPC), the rate-setting body of the RBI, unanimously decided to press a pause button. By a five to one majority, the MPC decided to remain focused on the “withdrawal of accommodation” to ensure that inflation progressively aligns with the target, while supporting growth.

The RBI has kept the key policy rates unchanged after six hikes in a row. The repo rate, the rate at which the central bank lends to commercial banks, has been raised by 250 basis points since May 2022.

Consequent to the repo rate remaining unchanged at 6.5%, the standing deposit facility rate will remain unchanged at 6.25% and the marginal standing facility rate and the bank rate at 6.75%.

GDP growth forecast raised

The RBI raised GDP growth forecast for 2023-24 marginally to 6.5% from its earlier projection of 6.4%. However, GDP growth in the current fiscal is projected to be substantially lower than 7% estimated for 2022-23 by the NSO.

CNG, PNG to be cheaper

With the government changing the pricing formula, CNG will cost Rs 80.5 per kg instead of Rs 89.5 in Bengaluru. Domestic PNG will cost Rs 52.5 per SCM instead of Rs 58.5.