• UGI USER
  • Feb 10, 2024
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  • 1 Comments

REPO RATE UNCHANGED

Why in the News?

  • RBI’s Monetary Policy Committee (MPC) retained the repo rate at 6.5% in a 5:1 majority decision during its bi-monthly review.
  • MPC also maintained the stance as ‘withdrawal of accommodation’ to balance inflation and growth concerns.

Inflation and Economic Outlook:

  • Headline inflation forecast remains at 5.4% for the fiscal year amid uncertainty in food prices.
  • Retail inflation surged to 5.69% in December, impacting MPC’s goal to sustainably reduce Consumer Price Indec (CPI) inflation to around 4%.
  • GDP growth projected at 7% for FY 2024-2025, reflecting geopolitical tensions and financial market volatility.
About Monetary Policy Committee (MPC)

·   Origin: Section 45ZB of the amended RBI Act, 1934 (2016) authorizes the central government to form a six-member Monetary Policy Committee (MPC).

·   Objective: Section 45ZB specifies that the MPC determines the Policy Rate to meet the inflation target.

·   Composition: The MPC comprises

o    RBI Governor (ex officio chairperson)

o    Deputy Governor responsible for monetary policy

o    A nominated Bank officer by the Central Board

o    Three individuals appointed by the central government.

Key Terms

·   Repo Rate: The rate at which the central bank (RBI) lends money to commercial banks to manage short-term liquidity needs and control inflation.

·   Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.

·   Headline Inflation (CPI): The measure of the total inflation within an economy, reflecting changes in the prices of a basket of consumer goods and services.