The six member rate setting monetary policy committee (MPC) kept the policy repo rate unchanged at 6.50 per cent by majority of 4:2 in the backdrop of retail inflation running above its 4 per cent target and the second quarter growth slowing to a two-year low of 5.4 per cent.
The MPC decided to continue with the neutral stance of the policy.
The last time there was an action on the repo rate was in February 2023, when it was upped from 6.25 per cent to 6.50 per cent. The rate has been rock steady since then.
The decision not to cut rates despite second quarter GDP slowing comes even as senior central ministers and the Chief Economic Adviser have pitched for a softer interest rate regime.
Besides above target retail inflation, experts say a strengthening US Dollar and FPI outflows, which are weighing down the Rupee, would have prompted the MPC to leave the repo rate unchanged.
Last month, Governor Shaktikanta Das had observed that a change in stance (from withdrawal of accommodation to neutral made in October 2024 bimonthly policy review) doesn’t mean that the next step is a rate cut in the very next meeting.
Experts underscored that retail inflation has risen to a 14-month high of 6.2 per cent (above the MPC’s 6 per cent upper tolerance level) in October from 5.5 per cent in September and it needs to be reined in.
