The Reserve Bank of India’s Monetary Policy Committee (MPC) concluded its October 2024 meeting with several critical decisions aimed at maintaining economic stability. As expected, the repo rate was held steady at 6.5% for the tenth consecutive time, reflecting a cautious approach amid global uncertainties. However, the committee altered its policy stance from “withdrawal of accommodation” to “neutral,” signaling potential rate cuts ahead.
Key Highlights:
- Interest Rates: The repo rate remains at 6.5%, with no changes to the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates, at 6.25% and 6.75%, respectively.
- Growth Projections: The RBI retained its FY25 GDP growth forecast at 7.2%, albeit with slight adjustments to quarterly estimates. While the second quarter saw a marginal reduction to 7%, the remaining quarters were adjusted upwards, reflecting optimism despite global challenges.
- Inflation Forecasts: Inflation estimates for FY25 were also mostly unchanged at 4.5%. There were minor adjustments to quarterly projections, underscoring the RBI’s watchful stance on aligning inflation to its 4% target in the medium term.
- Banking Reforms: The RBI introduced several measures, including expanding responsible lending norms to micro and small enterprises (MSEs) and plans to develop a climate risk information system, signaling broader financial reforms.
- Forward-Looking Approach: With a shift to a neutral stance, the central bank hinted at the possibility of rate cuts in 2024, likely in sync with global monetary easing cycles, potentially driving cumulative rate cuts of 50-75 basis points.
Despite a pause on rate changes, the RBI’s decisions reflect a cautious optimism, balancing inflation risks with growth priorities. With inflationary pressures easing slightly, the stance change paves the way for a more accommodative policy in the coming months.
