RBI pauses again to battle inflation: Keeps repo rate unchanged at 6.5 pc
The Reserve Bank of India Thursday left its key interest rate unchanged for a third straight meeting and signaled rate setters will be ready to act should food prices drive inflation higher. The central bank held the benchmark repurchase rate at 6.50% with the six-member monetary policy committee voting unanimously. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
Team RuralVoice
The Reserve Bank of India Thursday left its key interest rate unchanged for a third straight meeting and signaled rate setters will be ready to act should food prices drive inflation higher.
The central bank held the benchmark repurchase rate at 6.50% with the six-member monetary policy committee voting unanimously.
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 in Mumbai, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.
He said the MPC will remain watchful of the inflation and remains resolute to its commitment to align inflation to the targeted level.
While keeping the interest rate intact, Das said headline inflation still remains above RBI's target of 4 per cent.
The MPC meeting took place against the backdrop of consumer price-based (CPI) inflation on some food items like tomato, wheat and rice that have witnessed surge in price in the last few weeks.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
The equity indices Sensex and Nifty fell over half a percent each after the RBI kept the repo rate unchanged at 6.5%.
The RBI retained FY24 GDP growth projections at 6.5%, but raised the CPI inflation forecast for FY24 to 5.4%.
Meanwhile, commenting on the policy, Anuj Puri, Chairman of ANAROCK Group, said homebuyers’ EMIs have jumped up by 20% in the last two years. Home loan borrowers who were paying an EMI of approx. INR 22,700 in July 2021 are now paying approx. INR 27,300 - an increase of approx. INR 4,600 per month.
"This 20% increase in the EMI has resulted in a jump of approx. INR 11 lakh in the overall interest component - from approx. INR 24.5 lakh interest payable in 2021 to approx. INR 35.5 lakh today. The total interest payable over a 20-year tenure is now more than the principal amount," he said.
He also said that the risk of inflation continues to lurk and if it rises further, there could be some repercussions on overall sales, especially in the cost-sensitive affordable housing segment which has already been severely impacted by the pandemic over the last couple of years.
