The RBI Monetary Policy Committee (MPC) kept the policy repo rate at 6.50% for the 11th consecutive time, with 4 out of 6 members agreeing.
The Cash Reserve Ratio (CRR) for banks was reduced by 50 basis points to 4%, the first cut in 2.5 years.
This aims to provide more liquidity to the banking system and support economic growth.
The MPC maintained a ‘neutral’ policy stance, focusing on controlling inflation while supporting growth.
The inflation target remains aligned with 4% in the long run.
Inflation spiked to 6.2% in October, mainly due to rising food prices.
The GDP growth forecast for 2024-25 was revised down to 6.6% (from 7.2%), with growth concerns due to inflation impacting consumer spending.
Food inflation is expected to remain high in the short term but may ease by Q4 2024-25 with improved vegetable prices and harvests.
Increased adverse weather events, geopolitical uncertainties, and market volatility pose risks to inflation.
The CRR cut will release ₹1.16 lakh crore into the banking system, helping to ease liquidity stress.
To attract more capital inflows, the RBI raised interest rate ceilings on Foreign Currency Non-Resident (FCNR(B)) deposits. This change will be in effect until March 31, 2025.
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