Reserve Bank of India :  (RBI) Governor Shaktikanta Das believes that the current policy rate of 6.5 percent is broadly balanced and any justification for easing the policy at this juncture may be illusory. He said this in the Monetary Policy Committee (MPC) meeting earlier this month. During the voting on the repo rate in the MPC, two members advocated a rate cut. The last meeting of the MPC, the highest body that decides on the policy rate, was held between August 6 and 8. During this, the RBI announced to keep the repo rate unchanged for the ninth consecutive time.

Details of MPC meeting released

The Reserve Bank released the details of this MPC meeting on Thursday. According to this, the change in stance of increasing the policy repo rate by 2.50 percentage points from May 2022 and then withdrawing the adjustment has helped in gradually reducing inflation in 2022-23. Das had said, "With the forecast of 4.5 percent core inflation for FY 2024-25, the current policy repo rate is broadly in balance and avoids the costly impact of domestic economic activity."

Any justification for easing policy may be misleading

The RBI governor said that when durable inflation is progressing towards the target, the issue of equilibrium-neutral interest rate is premature. "Policymaking in the real world cannot be based on an abstract, theoretical and model-specific construct. Therefore, any justification for easing policy on the basis of so-called high real rates may be misleading," Das said. He also said that inflation is gradually coming down, but its pace is slow and uneven. A sustainable convergence of retail inflation with the target of four percent is still some way off. However, two members of the MPC - Ashima Goyal and Jayant R Verma - advocated a cut in the repo rate by 0.25 percentage points. But the third external member of the committee, Shashank Bhide, voted for the status quo along with the other three members.