Repo rate and other key policy rates remain unchanged

The Monetary Policy Committee (MPC) met on the 6th, 7th, and 8th February 2024 and decided to keep the policy repo rate at 6.50 percent and other key policy rates also remained unchanged for the 6th straight time.

RBI also left the policy stance unchanged with a focus on the withdrawal of accommodation. Withdrawal of accommodation refers to a policy of reducing the money supply in the system. This is done to control inflation while supporting growth.

RBI Governor Shaktikanta Das said that economic activity is expected to continue in fiscal year 2024-25 also. GDP forecast for Q1FY25 has been raised to 7.2% from 6.7%, Q2FY25 raised to 6.8% from 6.5%; Q3FY25 GDP growth forecast rose to 7.0% from 6.4%, while Q4FY25 GDP growth forecast has been pegged at 6.9%.

RBI left the FY24 inflation estimate unchanged at 5.4% and projects inflation to decline to 4.5% in FY25.

*SDF is the new floor for policy rates introduced by RBI in April 2022, as a mechanism to curb inflation by absorbing liquidity. The SDF rate is applied for which banks park their excess funds with the RBI without any collateral. However, the earlier system of reverse repo rate will remain as part of RBI’s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time, according to RBI’s announcement. This move of RBI makes the reverse repo rate redundant for now.