RBI Keeps Repo Rate at 6.5%, Predicts 6.5% GDP Growth Rate
The Wire Staff
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New Delhi: Following its second round of meetings this year, the RBI's Monetary Policy Committee (MPC) decided on Thursday, June 8 to maintain the policy repo rate at 6.5%.
The six-member committee announced its decision after meeting for three days.
"The MPC recognised that the pace of global economic activity is expected to decelerate in 2023, dragged down by elevated inflation, tight financial conditions and geopolitical tensions," RBI governor Shaktikanta Das said in explanation for the repo rate.
He continued to say that five out of the MPC's six members agreed to focus on the "withdrawal of accommodation" in order to keep inflation in check.
The MPC is that part of the RBI which sets the country's benchmark interest rate. The policy repo rate refers to the interest that the RBI charges commercial banks when they borrow from it.
The RBI is said to follow a policy of 'accommodation' when it is willing to lower its interest rates. But the RBI has been increasing its interest rates since May 2022 in order to control inflation, the Indian Express reported.
Maintaining this increase is what Das was referring to when he said the RBI would focus on the withdrawal of accommodation.
Apart from deciding the reserve bank's interest rate, the MPC also predicted that India's GDP would grow by 6.5% on average this financial year, lower than its 7.2% growth rate last financial year.
Also Read: Three Notes of Caution as India Celebrates Its GDP Growth
"Consumer and business outlook surveys display continued optimism. The headwinds from weak external demand, volatility in global financial markets, protracted geopolitical tensions and intensity of El Nino impact, however, pose risks to the outlook," Das said about the factors behind the GDP prediction.
The World Bank also cited global financial conditions when it recently revised India's projected GDP growth rate from a previous estimate of 6.6% to 6.3%, the Hindustan Times reported.
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