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RBI Maintains Repo Rate at 6.5% to Manage Inflation


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The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has announced its decision to maintain the repo rate at 6.5%. This marks the seventh consecutive time that the RBI has chosen to keep the rate unchanged. The repo rate is the interest rate at which the RBI lends funds to commercial banks for their short-term requirements.

Ongoing Strategy to Manage Inflation

The decision to keep the repo rate steady aligns with market expectations and is part of the RBI’s ongoing strategy to manage inflation. The central bank has been vigilant in its efforts to control inflation, which remains above its target of 4%. While there are signs of easing inflation, the current rate of 5.09% in February remains slightly higher than the previous month’s 5.1%.

“Withdrawal from Accommodation” Policy Stance Continues

In its first meeting of the fiscal year 2025, the MPC has reiterated its policy stance of “withdrawal from accommodation.” This stance reflects the committee’s commitment to managing inflation. Despite the strong growth of India’s economy, the MPC believes it is necessary to maintain a cautious approach to monetary policy to ensure that inflation remains under control.

India’s Economic Growth and GDP Forecasts

India’s economy expanded at a robust rate of 8.4% in the final quarter of 2023, driven by the manufacturing and construction sectors. This growth rate represents the fastest expansion in a year and a half. Encouraged by this performance, the government has upgraded its growth prediction for 2024 from 7.3% to 7.6%.

However, the MPC has maintained its GDP growth forecast at 7% for the fiscal year 2025, remaining unchanged from its previous policy announcement. This suggests that while the economy is expected to continue growing, the central bank remains cautious about potential risks and uncertainties that could impact economic performance in the coming year.

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