RBI opts for pause 2nd time in a row; keeps repo rate unchanged at 6.5%

The Reserve Bank of India on Thursday opted for a pause the second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderates.

The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.

While keeping the interest rate intact, Das said headline inflation still remains above RBI's target of 4 per cent and expected to remain so during the rest of the year.

Inflation projection has been slashed marginally to 5.1 per cent from earlier estimate of 5.2 per cent for current financial year.

He said retail inflation has been below the upper band of 6 per cent for the last two years.

The MPC meeting took place against the backdrop of consumer price-based (CPI) inflation declining to a 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12.

The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.