RBI MPC changes stance to neutral; keeps repo rate unchanged at 6.5%
Mumbai, Oct 9, 2024
MPC to 'remain unambiguously focused' on a durable alignment of inflation with the target, while supporting growth
The Reserve Bank of India (RBI) on Wednesday unanimously decided to change the monetary policy stance to neutral while keeping the repo rate unchanged for the tenth consecutive time at 6.50 per cent.
RBI Governor Shaktikanta Das said in his statement that despite the change in stance, the six-member Monetary Policy Committee (MPC) remains focused on bringing the headline inflation to 4 per cent on a durable basis. Five out of six members voted in favour of holding rates.
“Keeping in view the prevailing and expected inflation-growth dynamics, which are well balanced, the MPC decided to change the monetary policy stance from withdrawal of accommodation to ‘neutral’ and remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth,” said the monetary policy statement, adding that the change in stance provides flexibility to the MPC while enabling it to monitor the progress on disinflation which is still incomplete.
According to Das, the prevailing and expected inflation-growth balance have created congenial conditions for a change in monetary policy stance to neutral.
"Even as there is greater confidence in navigating the last mile of disinflation, significant risks – I repeat significant risks – to inflation from adverse weather events, accentuating geopolitical conflicts and the very recent increase in certain commodity prices continue to stare at us. The adverse impact of these risks cannot be underestimated," he said.
After increasing the repo rate by 250 basis points (bps) to 6.5 per cent between May 2022 and February 2023, the MPC kept the repo rate unchanged in all the previous nine policy review meetings.
Yield on government bonds softened after the MPC’s decision to change the stance to neutral. The yield on the benchmark 10-year government bond fell below the psychologically crucial 6.80 per cent mark in the early trade after FTSE Russell announced that it will include Indian bonds in its indices.
[The Business Standard]
