RBI Repo Rate | RBI Monetary Policy Meeting June 2024 Update; rbi governor shaktikanta das RBI will announce interest rates today: No change in repo rate expected, it will remain at 6.50% from February 2023

Today (June 7) i.e. Friday is the last day of the Monetary Policy Committee (MPC) meeting of the Reserve Bank of India (RBI). RBI Governor Shaktikanta Das will give a press conference this evening to give information about the decisions taken in this meeting which is going on from June 5.

According to experts, no change in the repo rate i.e. interest rate is expected in this meeting also. This is the second meeting for the financial year 2024-25. Currently the repo rate remains at 6.50%. RBI had not increased interest rates even in its earlier meeting held in April. RBI last raised rates by 0.25% to 6.5% in February 2023.

Monetary Policy Committee meets every two months
The Monetary Policy Committee of RBI meets every two months. There are six members in the MPC of RBI. It has both external and RBI officials. Along with Governor Das, RBI official Rajiv Ranjan serves as the executive director and Michael Debabrata Patra is the deputy governor. Shashank Bhide, Ashima Goyal and Jayant R Verma are external members.

In the financial year 2022-23, the repo rate was increased 6 times by 2.50%.
The first meeting of the financial year 2022-23 was held in April-2022. Then RBI had kept the repo rate stable at 4%, but by calling an emergency meeting on 2nd and 3rd May, RBI increased the repo rate by 0.40% to 4.40%.

This change in the repo rate took place after May 22, 2020. After this, in the meeting held from 6 to 8 June, the repo rate was increased by 0.50%. Due to this the repo rate increased from 4.40% to 4.90%. Then in August it was increased by 0.50%, taking it to 5.40%.

Interest rates increased to 5.90% in September. Then in December the interest rates reached 6.25%. After this, the last monetary policy meeting for the financial year 2022-23 was held in February, in which the interest rates were increased from 6.25% to 6.50%.

increase in inflation stopped
RBI Governor Shaktikanta Das had said regarding inflation that ‘Elephant (inflation) has now gone out for a walk and heading to the forest’ i.e. the rise in inflation has now stopped. At the same time, he had estimated inflation to be 4.5% and real GDP growth to be 7% in the financial year 2024-25.

Repo rate is a powerful tool to fight inflation
RBI has a powerful tool to fight inflation in the form of repo rate. When inflation is very high, RBI tries to reduce money flow in the economy by increasing the repo rate. If the repo rate is high then the loan received by banks from RBI will be expensive.

In return, banks make loans costlier for their customers. This reduces money flow in the economy. If money flow decreases, demand decreases and inflation decreases.

Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, RBI reduces the repo rate. Due to this, the loan from RBI becomes cheaper for the banks and the customers also get the loan at a cheaper rate.

Let us understand this with an example. When economic activities came to a standstill during the Corona period, demand decreased. In such a situation, RBI had increased the money flow in the economy by reducing interest rates.

What happens due to increase or decrease in reverse repo rate?
Reverse repo rate is the rate at which RBI gives interest to banks on keeping money. When RBI has to reduce liquidity from the market, it increases the reverse repo rate.

Banks take advantage of this by receiving interest for their holdings with the RBI. RBI increases the reverse repo rate during high inflation in the economy. Due to this, banks have less funds to give loans to customers.

RBI had also released inflation and GDP estimates in February.

Know what the inflation figures say?

1. Retail inflation 4.83% in April
Retail inflation has come down to 4.83% in April 2024. This is the lowest level of inflation in 11 months. In June 2023 it was 4.81%. Whereas a month ago i.e. in March 2024, the inflation rate was 4.85%. RBI’s range regarding inflation is 2%-6%. Ideally, RBI would like retail inflation to remain at 4%.

2. Wholesale inflation rate in April 1.26%
Wholesale inflation has increased to 1.26% in the month of April. This is the highest level of inflation in 13 months. Earlier in March 2023, the wholesale inflation rate was 1.34%. Inflation has increased due to increase in prices of food items. Whereas a month before this, in March 2024, it was 0.53%. Whereas wholesale inflation was 0.20% in February and 0.27% in January.

How does inflation affect?
Inflation is directly related to purchasing power. For example, if the inflation rate is 7%, then Rs 100 earned will be worth just Rs 93. Therefore, investment should be made only keeping inflation in mind. Otherwise the value of your money will reduce.