RBI keeps repo rate unchanged, shifts to neutral policy stance
RBI) Wednesday kept interest rates unchanged for the 10th straight policy review, but altered the stance of monetary policy to ‘neutral’ from ‘withdrawal of accommodation’, creating for itself the space to begin a rate-easing cycle as consumer inflation remains within the legally mandated tramlines.
At its fourth bi-monthly policy statement for 2024-25 (April-March), the RBI’s Monetary Policy Committee (MPC) said that the repo rate — or the rate at which the central bank lends to banks — will remain at 6.5%. All other rates also remain where they were. A basis point is a hundredth of a percentage point.
Five of the six members of the MPC voted to keep the repo rate unchanged, with incoming external member Nagesh Kumar voting for a rate cut of 25 basis points. This week’s MPC meeting is the first with three new external members – Saugata Bhattacharya, Ram Singh and Kumar.
All six members of the MPC voted to shift the stance of policy to neutral, which permits flexibility to lower or raise rates, depending on the evolving inflation trajectory. Under the withdrawal of accommodation stance, which the MPC adopted in April 2022, the rate-setting panel raised the repo rate by a total of 250 basis points from May 2022 to February 2023.
«Keeping in view the prevailing inflation and growth conditions and the outlook, the MPC considered it appropriate to change the stance to neutral and to remain unambiguously focussed on a durable alignment of inflation with the target while of course supporting growth,” RBI governor
