The Reserve Bank of India (RBI) decided to keep the repo rate at 5.25% in the meeting held on April 3, 2024. The decision was unanimous among the six members of the Monetary Policy Committee (MPC), consisting of three internal members from the central bank and three external experts, including Governor Sanjay Malhotra.
In addition to maintaining the base lending rate, the committee adopted a neutral stance regarding the current economic scenario. Inflation estimated for the ongoing fiscal year, beginning April 1, 2024, remains close to the 4% target set by the RBI. In this context, the latest data indicates a recovery in the pace of domestic growth, with clear signs of economic expansion.
The Indian government expects economic growth for 2024-2025 to exceed 7%. However, the impact of rising oil prices caused by the conflict between Iran, the United States, and Israel represents a challenge to these projections. Even before the MPC meeting, fuel prices had been pressuring inflation and threatening the country’s growth.
However, after the announcement of a temporary ceasefire between Iran and the US, which occurred shortly before the meeting, domestic financial markets responded with gains on April 3. The national currency, the rupee, appreciated against the dollar after hitting historic lows due to the initial effects of the international conflict.
The RBI’s decision also reflected the results of a survey with 71 economists, in which 69 predicted the repo rate would be maintained. With all MPC members aligned, the conservative stance indicates caution given the volatility observed in the global market. As stated, the central bank will remain attentive to the side effects related to high fuel prices.
The committee emphasized that it will follow a data-driven approach, continuously evaluating internal indicators such as inflation and consumption before implementing any changes. Geopolitical risks have increased since the last meeting in February 2024, which reinforces the need for constant monitoring.
Overall, maintaining the rate and neutrality in monetary policy meet the need to wait for clearer signals of global and domestic impacts before making adjustments. The RBI stressed it will continue monitoring the economy’s behavior to ensure inflation is controlled without compromising sustainable growth.
The conclusion of the process still depends on continuous analysis of economic data by RBI committee members, who will assess the next monetary policy decisions considering fluctuations in the international scenario and their repercussions in India.
