Anushruti Singh
RBI Repo Rate: The Reserve Bank of India decided on Thursday to hold the policy rate unchanged for the ninth time in a row, citing persistent food inflation. The RBI MPC made the judgment with a 4:2 majority vote.
The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
“Without price stability, growth cannot be sustained so we have decided to continue with the disinflationary stance,” Das explained. However, the RBI Governor said that the country’s inflation rate is expected to come down in the third quarter of the current financial year. He also said that domestic growth is resilient, supported by steady urban consumption.
The MPC determined that it is crucial for monetary policy to remain consistent while closely monitoring inflation. The committee emphasized maintaining a primary focus on inflation to support sustained economic growth. Das also said there “is a convergence” between the RBI monetary policy decision and market expectations. The RBI has decided to stick to the “withdrawal of accommodation” policy stance.
Monetary policy is considered to be “accommodative” when it aims to make more money available in the banking system to spur economic growth and create more jobs. The RBI Governor also said that inflation is receding gradually across economies, while medium-term global growth faces significant challenges. Despite this, domestic economic activity remains resilient, with manufacturing gaining traction due to improving demand. The RBI had last changed rates in February 2023, when the repo rate was hiked to 6.5 per cent. The RBI raised rates by 2.5 per cent between May 2022 and February 2023 after which they have been kept on hold to support economic growth despite inflationary pressures in the past.
Announcing the third bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.
He said MPC will remain watchful of elevated food inflation. The RBI keeps the growth projection unchanged at 7.2 per cent for the current financial year.
Avneesh Sood, Director Eros Group said that RBI’s decision to maintain the repo rate at 6.50% reflects a strategic approach aimed at sustaining economic stability amidst fluctuating inflationary pressures.
“By keeping the rate unchanged, the RBI underscores its commitment to managing price stability while supporting robust growth. This steady stance is particularly beneficial for the real estate sector, as it ensures that borrowing costs remain stable for both developers and homebuyers. Lower and predictable interest rates foster greater affordability in housing, bolster market confidence, and stimulate investment,”
As inflation trends show a decline and global economic conditions remain varied, this policy move provides crucial stability, enhancing predictability in the real estate market.
“By aligning monetary policy with growth objectives and inflation control, the RBI’s decision is poised to support continued expansion in the housing sector, offering positive prospects for future homebuyers and investors. The focus on price stability will ultimately facilitate a conducive environment for sustainable economic and real estate sector growth” he added.
