RBI Repo Rate

According to the Monetary Policy Statement of RBI, released on 7 June 2024, Global economic activity is rebalancing and is anticipated to grow steadily in 2024. Equity markets have reached new heights in both advanced and emerging economies. Prices for non-energy commodities have strengthened, while the US dollar and bond yields are showing variable movements, affecting emerging market currencies. Gold prices have hit record highs due to safe haven demand.

Domestically, the growth-inflation balance has improved since April 2024. Economic activity remains robust, supported by domestic demand. Investment demand is increasing, and private consumption is showing signs of recovery. Inflation is expected to temporarily dip below the target in the second quarter of 2024-25 due to a favourable base effect, before rising again. To achieve and maintain the target inflation rate, monetary policy must monitor the potential spillover effects from food price pressures on core inflation and inflation expectations.

The release further stated that the Monetary Policy Committee (MPC) is committed to maintaining inflation at the 4 percent target sustainably and to ensure this, has decided to keep the policy repo rate unchanged at 6.50 percent in this meeting.

The south-west monsoon is forecasted to be above normal, which is positive for agriculture and rural demand. Combined with ongoing momentum in manufacturing and services, this should help revive private consumption. Investment activity is expected to stay on course, supported by high capacity utilization, strong balance sheets of banks and corporations, the government’s continued focus on infrastructure spending, and positive business sentiment. Improving global trade prospects could bolster external demand. However, risks to the outlook include geopolitical tensions, volatility in international commodity prices, and geoeconomic fragmentation. Considering these factors, real GDP growth for 2024-25 is projected at 7.2 percent, with quarterly growth rates of 7.3 percent in Q1, 7.2 percent in Q2, 7.3 percent in Q3, and 7.2 percent in Q4.

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