RBI Monetary Policy 2024 Key Highlights

What is Monetary Policy?

Monetary policy refers to the actions taken by a central bank, like the RBI in India or the Federal Reserve in the US, to manage a country’s money supply and influence economic activity. It’s basically a toolbox for fine-tuning the economy.

Here’s how it works:

• Central bank control: The central bank acts as the main driver of monetary policy. It implements various tools to achieve economic goals like price stability (low and predictable inflation) and maximum employment.

• Tools of the trade: There are a few key tools central banks use:

  • Interest rates: By raising or lowering interest rates, the central bank can influence borrowing costs. Lower rates make borrowing cheaper, encouraging spending and investment, which can boost economic activity. Higher rates have the opposite effect, aiming to curb inflation.
  • Open market operations: This involves buying or selling government bonds in the open market. Buying bonds injects money into the system, while selling bonds does the opposite. This helps control the overall money supply.
  • Reserve requirements: These are the minimum amounts of cash banks must hold as reserves. Changing these requirements can influence how much banks can lend out, impacting the money circulating in the economy.

• Objectives in mind: The main goals of monetary policy are:

  • Price stability: Keeping inflation low and stable is crucial for healthy economic growth.
  • Maximum employment: Promoting full employment by fostering conditions for businesses to create jobs.
  • Economic growth: Monetary policy can help stimulate economic growth by encouraging investment and spending.

Overall, monetary policy plays a significant role in managing economic fluctuations and steering the country towards a stable and prosperous future.

The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) voted unanimously to keep the repo rate unchanged at 6.50% in its bimonthly policy review on April 5, 2024. This marks the fourth consecutive meeting where rates have been left untouched.

RBI Governor Shaktikanta Das stated that India’s GDP growth for 2024-25 is projected at 6.8%, slightly lower than the 7% forecast earlier. He cited moderating external demand and tightening global financial conditions as factors weighing on the growth outlook.

On inflation, Das said consumer price rise is expected to average 5.1% in the current fiscal year, remaining above the RBI’s tolerance band of 2-6% for a third straight year. However, the central bank expects inflation to ease gradually and return within the target range in the second half of 2024-25.

The RBI reiterated its focus on withdrawal of accommodation to ensure inflation remains within the target going forward, while supporting economic growth

The Reserve Bank of India (RBI) just announced its first bi-monthly monetary policy for the financial year 2024-25 (as of April 5, 2024). Here are the key takeaways:

• Repo Rate Unchanged: The RBI decided to maintain the repo rate, the key short-term lending rate, at 6.5% for the seventh consecutive meeting. This indicates a continuation of the policy stance to control inflation.
• Focus on Inflation Control: Governor Shaktikanta Das emphasized the need for continued disinflationary measures despite positive economic growth projections.
• Economic Growth Forecast Maintained: The RBI retained its economic growth forecast for FY25 at 7%. This optimism stems from factors like strengthening rural demand, improving job market, and a pick-up in manufacturing.
• Dissenting Vote: One member of the Monetary Policy Committee (MPC) advocated for a rate cut, expressing concerns that current rates might hinder economic growth.