RBI’s August 2023 Monetary Policy Meeting Highlights

RBI’s August 2023 Monetary Policy meeting highlights encompass the RBI’s decisions, economic assessments, inflation forecasts, and policy measures discussed during the August 2023 Monetary Policy Meeting.

1. Repo Rate Unchanged at 6.5%:

• The Reserve Bank of India (RBI) has maintained the repo rate at 6.50% during its August 2023 monetary policy meeting.
• The decision was taken unanimously by the six-member Monetary Policy Committee (MPC).

2. Inflation Trends and Forecasts:

• Headline inflation, which dropped to 4.3% in May 2023, experienced a rise in June and is expected to further surge in July and August due to higher vegetable prices.
• The RBI has projected India’s Q2 retail inflation at 6.2%, Q3 at 5.7%, and Q4 at 5.2% for the current fiscal year.
• The CPI inflation forecast for FY2023-24 has been revised from 5.1% to 5.4% due to shocks in vegetable prices.

3. Economic Outlook:

• Despite weak external demand, domestic economic activity remains robust and is likely to maintain its momentum.
• The RBI has retained the GDP growth forecast for the fiscal year at 6.5%, with balanced risks.

4. Monitoring Inflation Trajectory:

• The MPC remains committed to aligning inflation with the target of 4% and anchoring inflation expectations.
• The cumulative rate hike of 250 basis points implemented by the MPC is gradually affecting the economy.
• The MPC decided to stay vigilant and assess the evolving situation before making any policy changes.

5. Liquidity Measures:

• The RBI has instructed banks to maintain an incremental cash reserve ratio of 10% on the growth in deposits between May 19 and July 28, effective from the August 12 fortnight.

6. UPI Payment Updates:

• The RBI announced changes in UPI payments, allowing offline payments using near-field communication.
• The payment limit via UPI Lite has been increased from Rs 200 to Rs 500.

7. Transition to Fixed-Rate Regime:

• Home loan and other borrowers are permitted to switch to a fixed-rate regime, according to the RBI’s directive.

8. Consistent Policy Stance:

• This marks the third consecutive monetary policy meeting in which the MPC has chosen to keep the repo rate unchanged at 6.50%.
• Previously, the MPC had increased the repo rate by 250 basis points from May 2022 to February 2023.

9. Positive Indian Economic Outlook:

• RBI Governor Shaktikanta Das noted that the Indian economy remains a bright spot in the global landscape.

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