No Impact On EMIs As RBI Keeps Repo Rate Unchanged At 6.5%
The Reserve Bank of India (RBI) has decided to keep the repo rates unchanged at 6.5% for the third consecutive time due to concerns over inflation. The decision was made during the three-day RBI’s third monetary policy committee meeting. The RBI conducts bi-monthly meetings where it decides on interest rates, money supply, inflation outlook, and other macroeconomic indicators.
“The Monetary Policy Committee has unanimously decided to keep the Repo Rate unchanged at 6.50%,” said RBI Governor Shaktikanta Das.
In its previous meeting in June, the RBI had also kept the repo rate unchanged at 6.5%, as expected by most analysts. The Repo Rate has been raised cumulatively by 250 basis points to 6.5% since May 2022, with the exception of the pause in April. This increase in interest rates helps to suppress demand in the economy and reduce the inflation rate.
India’s retail inflation has been above the RBI’s target of 6% for three consecutive quarters, but it fell back to the RBI’s comfort zone in November 2022. Under the flexible inflation targeting framework, if the CPI-based inflation is outside the range of 2-6% for three consecutive quarters, the RBI is considered to have failed in managing price rises.
What Is Repo Rate?
The repo rate is the rate at which the RBI lends to other banks. The RBI has decided to keep the repo rate unchanged due to a consistent decline in inflation, which is currently at an 18-month low, and the potential for further decline. India has managed to steer its inflation trajectory well compared to other countries, including advanced economies.
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