RBI MPC Keeps Policy Repo Rate Unchanged At 5.25%

RBI MPC Meeting: The Reserve Bank of India's Monetary Policy Committee (MPC) has decided to keep policy the repo rate unchnaged at 5.25%, while keeping retaining its neutral stance. on June 5, Friday. 

Deciphering the rationale behind not backing a repo rate hike in June, RBI Governor Sanjay Malhotra said, "The global environment has deteriorated since the last policy meeting in April with the conflict lingering amid a fragile truce." 

Further, he noted that "adverse implications of the extended disruption in supply chain and elevated energy prices are reflected in the moderation of growth." 

RBI Governor Sanjay Malhotra On Inflation Outlook & Concerns

Announcing the outcome of the Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra said the central bank now expects consumer price inflation (CPI) to average 5.1% in FY27, up 50 basis points from its last projection of 4.6%.

While inflation projections have increased since RBI's April policy meeting, the central bank governor said CPI inflation remains below target despite global shock as the pass through on domestic prices has been limited.

However, the baseline projections points towards headline inflation, firming upto the upper tolerance level in Q3 this year. “The impact of supply shock is expected to wain Q4 onwards,” according to Malhotra. 

Meanwhile, the underlying inflation pressures continue to remain benign in this juncture. However, “generalisation of inflation through a second round affects expectations and wages is distinct possibility.”

The RBI Governor also noted that inflation outlook remains "clouded" due to El Niño risks. 

While inflation has remained below the RBI’s medium-term target of 4% in recent months, experts believe the benign phase may be coming to an end.

In April, the. headline CPI inflation stood at 3.4% in March and 3.5% in April, below target despite global commodity shocks.

The central bank now expects inflation to accelerate through the year, with quarterly projections of 4.2% in the first quarter, 5.1% in the second quarter, 5.9% in Q3 and 5.4% in Q4. 

(This is a developing story)