RBI maintains status quo for the second time as CPI inflation eases

The Reserve Bank of India (RBI) on Thursday opted for a pause for the second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderated.

The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022. 

Announcing the bi-monthly monetary policy on Thursday, RBI Governor Shaktikanta Das said that the Monetary Policy Committee (MPC) unanimously decided to keep the Repo Rate unchanged at 6.5 per cent. 

While keeping the interest rate intact, Mr Das said that headline inflation still remained above the RBI’s target of 4 per cent and expected it to remain so during the rest of the year. 

Inflation projection has been slashed marginally to 5.1 per cent from an earlier estimate of 5.2 per cent for the current financial year. 

The RBI governor said that retail inflation had been below the upper band of 6 per cent for the last two years. 

The MPC meeting took place against the backdrop of Consumer Price Index (CPI)-based inflation declining to an 18-month low of 4.7 per cent in April. The RBI chief had governor recently indicated that the May print would be lower than that of the April numbers. The CPI for May is scheduled to be announced on June 12. 

The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.

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