RBI Retains Interest Rate At 6.50%; Moves Its Stance From 'Withdrawal Of Accommodation' To 'Neutral'

On Wednesday, October 9, the Reserve Bank of India once again retained its repo rate of 6.50 per cent, retaining the status quo. The central bank has resorted to sustaining the same rate for the 10th straight time. This was announced by the government's banker after a 3-day Monetary Policy Committee meeting that concluded on October 9.

RBI Maintains Repo Rate 6.50%

The governor started his address after the 51st MPC meeting by remarking on the 8 years of the flexible inflation targeting framework. This framework introduced in 2016, according to the governor, has assisted in bringing about stability in the economy, especially during the pandemic years.

The RBI has now moved its stance from 'Withdrawal of Accommodation' to 'Neutral'.

The MPC came to this decision with a 5-1 majority of the committee. The rate has remained at 6.50 per cent since February 2023.

Food inflation, according to the RBI, could ease later on in the fiscal year.

The MSF or Marginal Standing facility, remained at 6.75 per cent. The SDF, or Standing Deposit Facility remained at 6.25 per cent.

This MPC meeting started on October 7 and concluded on October 9. These MPC meetings, under the leadership of the RBI governor (currently Shaktikanta Das), ruminate and decide upon the monetary policies for the country every two months. The next MPC is scheduled to happen in December.

The GVA or the Gross Value Added, increased by 6.8 per cent. The RBI retained the GDP expectations at 7.2 per cent.

Why Repo Rate Matters

Simply put, a repo rate is the amount at which the central bank lends money to commercial banks.

A repo rate would inevitably result in higher loan interest rates, which would limit your ability to borrow money and the amount of money that is available to the market and the economy as a whole.

The RBI governor is expected to hold a post-meeting presence press conference later on October 9 at around 12:00 IST.

US Fed Slashes Rates

This comes at a time when the inflation rate in some major economies has not aggravated as expected before, giving some respite to governments in some of the major economies.

The RBI's decision comes at the back of the US Fed taking its chance in September and aggressively cutting the interest rates. The US Fed cut interest rates by a mammoth 50 basis points.

The current US interest rate stands at 4.75–5.00 per cent. This was the first rate cut since the pandemic days, when the global economy was in tatters.