This is the sixth time in a row that the RBI has kept the repo rate unchanged at 6.5%. The repo rate is the rate at which the RBI lends to the banks.
The six-member MPC meeting began on Tuesday and its decisions were announced by RBI governor Shaktikanta Das on Thursday.
Since May 2022, the RBI has raised the repo rate by a cumulative 250 basis points (bps) in an effort to combat rising inflation. However, since February 2023, it has not adjusted the rate due to a slight easing in inflationary pressures. Since then, inflation has consistently hovered near the higher end of its mandated 2%-6% range, significantly surpassing its medium-term goal of 4%.
The RBI has been tasked by the government with maintaining retail inflation, as measured by the consumer price index (CPI), at a target of 4 percent, allowing for a fluctuation margin of 2 per cent in either direction.
It falls upon the monetary policy committee (MPC) to set the policy repo rate to meet this inflation goal, while also considering the aim of fostering economic growth.