RBI MPC highlights: FY25 growth forecast at 7%, CPI seen at 4.5%

The Reserve Bank of India's Monetary Policy Committee (MPC) on April 5 decided to keep policy rate unchanged for the seventh time in a row and said that it remains vigilant towards upside risks to food inflation.

The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022. Announcing the first bi-monthly monetary policy for FY25, RBI Governor Shaktikanta Das said the MPC has decided to keep the repo rate unchanged at 6.5% by a majority vote of 5:1.

The RBI on Friday retained inflation projection at 4.5% for the current financial year, lower than 5.4% in the last fiscal. Assuming a normal monsoon this year, CPI (consumer price index-based) inflation for the current year is projected at 4.5%, with Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%. Assuming a normal monsoon this year, CPI (consumer price index-based) inflation for the current year is projected at 4.5%, with Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%.

Das also stressed on the need to remain vigilant on food prices, given the forecast of higher temperatures between April-June. He also said that the impact of reduction in fuel prices on inflation will deepen in the coming months. He also said that the impact of reduction in fuel prices on inflation will deepen in the coming months.

Meanwhile, at post-policy press conference, RBI Deputy Governor M D Patra said there's no change in RBI's foreign exchange risk management policies when asked about exchange-traded currency derivatives.

Some market participants have been misusing the facility. Rules state that exchange-traded currency derivatives are only for hedging purpose. Moot point is that underlying exposure is mandatory for them, said Patra.

Here are key highlights from Governor Shaktikanta Das' speech:

• MPC will remain resolute in its commitment to align inflation to RBI's target of 4%, says Das.
• Global debt-to-GDP ratio remains high, may have spill-over effect on emerging economies: RBI Guv.
• MPC decides to remain focused on withdrawal of accommodative stance: RBI Governor Shaktikanta Das
• Rural demand catching up, consumption expected to support economic growth in FY25: RBI Guv.
• Moderating inflationary pressure, sustained momentum in manufacturing, services sectors should boost private investment: RBI Guv.
• India's GDP growth for FY25 projected at 7%: RBI Guv Shaktikanta Das.
• Global growth remains resilient; recent uptick in crude oil prices needs to be closely monitored: RBI Guv Shaktikanta Das.
• Continuing geopolitical tensions pose upside risks to commodity prices: RBI Guv.
• Indian rupee has largely remained range-bound among emerging market peers, exhibited lowest volatility in 2023. India continues to be largest recipient of remittances, says RBI Governor Shaktikanta Das.
• High, persisting food inflation could unhinge anchoring of inflationary expectations: RBI Guv.
• Elephant in the room (inflation) appears to have gone out for a walk, we want it to remain in forest: RBI Guv.
• RBI retains inflation forecast at 4.5% with risk evenly balanced assuming normal monsoon for current fiscal. Food inflation continues to show considerable volatility, says Das.
• RBI will remain nimble, flexible in its liquidity management: RBI Guv.
• Our effort is to ensure price stability on an enduring basis, says RBI Governor Shaktikanta Das
• It is our prime focus to build up a strong buffer in form of forex reserves. India's forex reserves reached all-time high of $645.6 billion as of March 29, says RBI Guv Shaktikanta Das.
• Indian rupee has largely remained range-bound among emerging market peers, exhibited lowest volatility in 2023. India continues to be largest recipient of remittances, says RBI Governor Shaktikanta Das.
• Banks, NBFCs, other financial institutions must continue to give highest priority to governance: RBI Guv.
• Monetary policy transmission continues to be 'work in progress' in the credit market, says RBI Governor.
• RBI to soon notify scheme for trading on sovereign green bond at International Financial Services Centre: RBI Guv.
• RBI proposes to allow cash deposits through UPI: Guv Shaktikanta Das.
• RBI permits small finance banks to use interest rate futures for proprietary hedging.
• Upcoming decade going to be transformational journey as RBI moves towards 100 years of its establishment: Guv Das.
• Permit use of third-party apps to make PPI prepaid payment instrument for UPI. Distribution of CBDC to be allowed via non-bank payment system operators, says Governor Das.