RBI has kept interest rates unchanged at 6.5% for the fourth consecutive time. That means your EMI will not increase. RBI Governor Shaktikanta Das today informed about the decisions of the Monetary Policy Committee on Friday. The Monetary Policy Committee meeting began on October 4.
— ReserveBankOfIndia (@RBI) October 6, 2023
Repo rate kept steady at 6.50%
Currently, the repo rate is at 6.50 percent and experts were already expecting it to remain stable. Last year, the central bank raised the rate several times in order to control the inflation rate that reached its peak. The repo rate was 4 percent in May 2022, rising to 6.50 percent by February 2023. However, it has since been retained. Shaktikanta Das said that despite the challenges in the world, India is a growth engine
RBI hiked the repo rate to 6.5 percent in February 2023. This has not changed since then. Monetary policy meets every two months. The first meeting of this financial year was held in April. While the repo rate was increased 6 times by 2.50% in the last financial year.
All members were in favor of keeping rates steady
The RBI governor said all MPC members were in favor of keeping the policy rate steady. RBI has also not changed its norms. 5 out of 6 members are in favor of maintaining a favorable attitude.
Repo rate is a powerful tool to fight inflation
RBI has a powerful tool to fight inflation in the form of repo rate. When inflation is too high, the RBI tries to reduce the flow of money into the economy by increasing the repo rate. If the repo rate remains high, the loans that banks get from RBI will be expensive. In turn, banks make loans more expensive for their customers. This reduces the flow of money in the economy. If the flow of money decreases, demand decreases and inflation decreases.
Similarly, when the economy goes through a bad phase, recovery needs to increase the flow of money. In such a situation, RBI reduces the repo rate. This makes loans from RBI cheaper for banks and also for consumers at cheaper rates. Let us understand this with an example. When economic activities came to a standstill during the Corona period, demand fell. In such a situation, RBI increased the flow of money in the economy by reducing interest rates.
RBI also released inflation and GDP estimates
The RBI Governor also released inflation estimates and GDP estimates. Inflation forecast for FY24 has been maintained at 5.4%. It was raised to 5.4% from 5.1% in the last meeting. The RBI governor said that inflation is expected to come down in September.
Real GDP growth estimate for FY24 has been maintained at 6.5%. Also, the real GDP estimate for the first quarter of FY25 has also been maintained at 6.6%. The RBI Governor said that there is a slowdown in the global economy due to the geopolitical crisis.
Know what inflation statistics say?
- Retail inflation 6.83% in August
In the month of August, there was a decrease in the retail inflation rate. It came down to 6.83%. Earlier in July it was 7.44%. This fall in inflation is due to low prices of vegetables. However, the inflation rate is still ahead of the RBI’s upper tolerance limit of 6%. - The wholesale inflation rate was -0.52%
Wholesale inflation rose to -0.52% in August. It was -1.36% in July. This was the fifth consecutive month when wholesale inflation was negative. That is, it remained below zero. Also, food items became cheaper in August, with food inflation falling from 7.75% to 5.62%.
How does inflation affect?
Inflation is directly related to purchasing power. For example, if the inflation rate is 7%, 100 rupees earned will be worth only 93 rupees. So investment should be done keeping in view of inflation. Otherwise the value of your money will decrease.
