MUMBAI: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged at 5.5 per cent and retained a “neutral” monetary stance, RBI Governor Sanjay Malhotra announced.
“The Monetary Policy Committee considered it prudent to wait for the impact of previous policy actions to materialize and for greater clarity to emerge before starting the next course of action. Accordingly, the MPC unanimously voted to keep the policy repo rate unchanged at 5.5 per cent and also decided to retain the stance as neutral,” Malhotra said in a statement.
Consequently, the RBI Governor stated, the Standing Liquidity Facility (SLF) rate remains at 5.25 per cent, while the Marginal Standing Facility (MSF) rate and the bank rate remain at 5.75 per cent.
The MPC also revised its average inflation forecast for the current financial year to 2.6 per cent from the earlier projection of 3.7 per cent in June and 3.1 per cent in August.
“Headline inflation for Q4 this year and Q1 next year too has been revised downwards and is broadly aligned with the target despite unfavourable base effects,” Governor Malhotra said.
He said that the economic growth in the second half (H2) of this year is likely to decelerate due to prevailing global uncertainties and tariff-related developments.
“The current macroeconomic conditions and the outlook has opened up policy space for further supporting growth. The trade-related uncertainties are also unfolding,” he noted.
Malhotra further stated that the ongoing tariff and trade policy uncertainties will impact external demand. Prolonged geopolitical tensions and volatility in international financial markets, caused by the risk of sentiments of investors, pose downside risks to the growth outlook.
He said that the next-generation GST reform, which came into force on September 22, is expected to work as a cushion to negate some of the adverse effects of the external headwinds.
“Taking all these factors into account, real GDP growth for this year is now projected at 6.8 per cent. This is a revision from our earlier forecast of 6.5%; now it is projected at 7%, Q3 at 6.4%, and Q4 at 6.2%. Real GDP growth for Q1 next year is projected at 6.4%. The risks are evenly balanced,” he added.
Agencies