The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) decided not to change the repo rate for the eighth consecutive time on Friday, June 7. The repo rate remains steady at 6.5%.
The decision was made with a majority of 4:2 among the six-member committee. As a result, the burden of Equated Monthly Installments (EMIs) on borrowers will not increase, nor will the loan rates of banks rise.
Previously, between May 2022 and February 2023, the RBI raised the repo rate by 2.50 percent to reach 6.5%. Since then, the committee has maintained this rate through eight consecutive meetings.
Factors Influencing Future Rate Changes
RBI Governor Shaktikanta Das indicated that any future changes to the policy rate would depend on various factors, including the actions of the US central bank and other developed economies.
Local economic conditions will also be taken into account before making any decisions regarding interest rates.
Role of Inflation in Rate Decisions
The Monetary Policy Committee emphasized that it needs to see signs of retail inflation reaching a sustainable level before considering any rate changes.
Although the inflation rate has decreased in recent months, it still exceeds the central bank’s medium-term target of 4%. In April, the retail inflation rate was at a 10-month low of 4.83%, slightly down from 4.85% in March.
The RBI aims to bring inflation within the target range of 2 to 6 percent and then reduce it further to 4% on a sustainable basis.
According to RBI projections, retail inflation is estimated to be 4.9% in the first quarter, 3.8% in the second quarter, 4.6% in the third quarter, and 4.5% in the fourth quarter.
This version maintains the original information, simplifies the language, and adds headings for better readability.
