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The Reserve Bank of India (RBI) announced its decision to maintain the repo rate at 6.50%, marking the fifth consecutive meeting where the Monetary Policy Committee (MPC) has opted for the status quo. RBI Governor Shaktikanta Das, who heads the MPC, revealed that five out of six members voted in favor of withdrawing accommodation. The pause in the rate increase cycle comes after six consecutive hikes totalling 250 basis points since May 2022, with the last increase in February 2023. The MPC is committed to an actively disinflationary stance. Despite inflation declining to 4.87% in October, the MPC emphasized its focus on withdrawing accommodation to align inflation with the target while supporting growth. The GDP growth projection for the current fiscal year was raised to 7%, and the RBI projected Consumer Price Index-based retail inflation at 5.4%. The decision reflects a cautious approach amid evolving economic conditions, with the central bank closely monitoring inflation and growth dynamics.

For lenders, it means that borrowing costs are likely to remain unchanged for the time being. However, lending institutions will still need to monitor economic indicators, inflation trends, and the overall financial landscape for potential future adjustments in interest rates. Overall, the RBI’s decision reflects a careful approach to managing the delicate balance between price stability and economic growth in the lending environment.

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