In the battle between growth and inflation, the RBI-led monetary policy committee (MPC)has left the benchmark repo rate unchanged yet again but reduced cash reserve ratio (CRR) to infuse liquidity into the banking system.

The rate-setting MPC decided with four members in favour of the repo rate remaining untouched at 6.5% for the 11th straight time. Dr Nagesh Kumar and Professor Ram Singh, the two external members, voted for a reduction in the  policy rate by 25 basis points.

The six-member MPC was, however, united in deciding to continue with the ‘neutral’ stance and to remain unambiguously focused on durable alignment of inflation with the target, while supporting growth. The RBI’s target is to bring inflation down to 4%. 

“MPC believes that only with durable price stability can we secure a strong foundation for high growth. It is committed to restoring inflation-growth balance in the interest of the economy,” RBI Governor Shaktikanta Das said.

The standing deposit facility (SDF) rate remains at 6.25%, while the marginal standing facility (MSF) rate and the bank rate remain at 6.75%. 

The RBI found space to cut CRR by 50 basis points to 4%, a move that is set to release Rs 1.16 lakh crore to the banking system. CRR is the proportion of deposits that banks need to keep with the RBI without earning any interest.

The RBI has also revised its GDP growth forecast for FY25 to 6.6%, significantly lower than its earlier projection of 7.2%. This followed the slowing down of the growth of the economy to a nearly two-year low of 5.4% for the second quarter of this fiscal.

Inflation, on the other hand, was revised upwards to 4.8% for financial year 2024-25, from 4.5% projected earlier.