The Reserve Bank of India (RBI) on Friday kept the policy repo rate unchanged at 6.50 per cent for the seventh consecutive time as it remained upbeat on growth but wary about food price uncertainties.

There will be no changes in the EMIs on home and auto loans that are linked to this benchmark rate.

The decision came at the end of a three-day meeting of the monetary policy committee (MPC) — five members of the panel voted to keep the repo rate intact at 6.50 per cent, while Jayanth R. Varma favoured a reduction by 25 basis points.

Varma also voted for a change in the stance to neutral, with the others favouring withdrawal of accommodation.

The repo rate was hiked by 250 basis points between May 2022 and February 2023. The panel has retained the key rate at the present levels since April 2023.

The MPC was optimistic about an increase in private consumption as it pointed to
robust government capital expenditure and signs of an upturn in the private capex cycle.

It did raise concerns about the headwinds from geopolitical tensions, volatility in international financial markets, geo-economic fragmentation, rising Red Sea disruptions, and extreme weather events, which could pose risks to the outlook.

The increasing incidence of climate shocks remains a key upside risk to food prices.
“We anticipate that MPC will contemplate a shallow 50 basis point rate cut cycle from the third quarter 2024-25 as headline inflation moderates around 4.5 per cent. By that time, the RBI will gain further clarity on the risks associated with food inflation and the policy outlook of the US Fed,’’ a note from CareEdge said.

“The regulator expects inflation to decline to 4 per cent by the second quarter 2024-25. This could mean that the RBI would maintain a status quo on rates in the coming meetings before considering rate cuts in the latter part of the first half of 2024-25,’’ Axis Securities said in a report.

Equity benchmark index Sensex registered marginal gains to hit a fresh lifetime high of 74248 on Friday after the Reserve Bank maintained the status quo on key interest rates amid a negative trend in global markets.

Although the RBI meeting unfolded as expected, concerns over food inflation and warnings of a heat wave tampered sentiment, Vinod Nair, head of research, Geojit Financial Services, said. The rise in oil prices hit sentiment.