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Monetary policy meeting: RBI extends pause, keeps repo rate unchanged at 6.5%

RBI MPC meeting June 2023: RBI Governor Shaktikanta Das said headline inflation is above the target of 4 percent and is expected to remain so during the rest of the year.

RBI Monetary Policy Committee Meeting June 2023: Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday announced that the Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 6.50 percent.

The RBI governor said the MPC also, by a majority of five out of six members, decided to focus on ‘return of accommodation’ to ensure that inflation progressively aligns with the growth target.

Das said headline inflation is above the target of 4 percent and is expected to remain so during the rest of the year.

The governor said the pace of global economic activity is expected to moderate in 2023, primarily because it is being pulled down by high inflation, tight financial conditions and geopolitical tensions, which are still ongoing.

BI MPC meeting June
RBI Monetary Policy meeting

The pace of monetary tightening has slowed in recent months, but uncertainty remains over its future path, as inflation continues to slide above target around the world.

The RBI governor said that GDP growth is expected to be 8 percent in the first fiscal year of FY2024, followed by 6.5 percent in the second quarter, 6 percent in the third quarter and 5.7 percent in the fourth quarter. For the full fiscal year 2023-24, the RBI retained the GDP growth forecast at 6.5 percent.

However, the central bank cut the retail inflation forecast for FY24 to 5.1 percent from 5.2 percent earlier.

In April, the RBI’s MPC unanimously decided to keep the repo rate unchanged at 6.50 percent, after increasing it by 250 basis points consecutively through May 2022 to keep the country’s inflation under control. The central bank had maintained its stance of “rolling back the accommodation” at its bi-monthly meeting in April.

In April, consumer price index-based (CPI) inflation eased to an 18-month low of 4.7 per cent from 5.7 percent in March, within the RBI’s 2-6 percent target band.

Das said the standing deposit facility (SDF) rates have remained unchanged at 6.25 percent, and the marginal standing facility (MSF) rate and the bank rates at 6.75 percent.

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