RBI Monetary Policy December 2024: RBI Holds Repo Rate Steady at 6.5%, Focuses on Inflation Control
RBI monetary policy December 2024: In a widely anticipated move, the Reserve Bank of India (RBI) left the repo rate unchanged at 6.5% for the 11th straight time. The decision, revealed on December 6 after the three-day Monetary Policy Committee (MPC) meeting, underscores the RBI’s careful balancing act between curbing inflation and reviving economic growth.
RBI monetary policy December 2024: Highlights of the Policy
Repo Rate Remains Unchanged
Despite slowing GDP growth, four of six MPC members voted to maintain the repo rate at 6.5%, while two called for a 25-basis-point reduction. The RBI also revised the GDP growth forecast for FY25 down from 7.2% to 6.6%, citing macroeconomic headwinds.
CRR Cut to Ease Liquidity
To address tight liquidity conditions, the RBI announced a 50-basis-point reduction in the Cash Reserve Ratio (CRR). Split into two phases, this move will release ₹1.16 trillion into the financial system, providing relief from tax-driven cash shortages.
NRI Deposit Incentive
In a bid to attract foreign funds, the RBI temporarily increased the ceiling on NRI deposit rates by 150 basis points until March 2025. This initiative is expected to bolster capital inflows.
RBI monetary policy December 2024: Balancing Growth with Inflation Control
RBI Governor Shaktikanta Das acknowledged the challenges posed by weaker GDP growth, which slowed to 5.4% in Q2 FY25. Nonetheless, inflation management remains the central focus, with projections for FY24-25 at 4.8%. Fluctuations in food and vegetable prices, along with rising input costs, are key concerns.
Broader Economic Implications
- Liquidity Relief: The CRR reduction will support banks by boosting their net interest income and improving credit availability.
- Rate Cuts on the Horizon: Experts predict the RBI may initiate rate cuts by February 2025, starting with a cumulative reduction of 100 basis points.
This policy signals the RBI’s intent to stabilize the economy while keeping inflation under control, setting the stage for potential monetary easing next year.
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