RBI holds interest rate at 6.5%, changes stance on future cut

News: RBI’s Monetary Policy Committee voted in favor of maintaining benchmark interest rate at 6.5%, but kept the doors open for future rate cuts by shifting its policy stance from ‘withdrawal of accommodation’ to ‘neutral’

1. Monetary Policy Committee (MPC): It is a statutory body under the RBI Act, 1934.

2. It is responsible for fixing benchmark interest rates in India and maintains price stability while keeping in mind the objective of growth.

3. It comprises of 6 members- 3 officials of RBI and 3 external members nominated by the GOI.

4. The Governor of RBI is the ex-officio chairperson of the MPC.

5. Govt. Of India has mandated MPC to maintain 4% annual inflation until 31 March 2026 with an upper tolerance of 6% and a lower tolerance of 2%.

6. Headline Inflation: It is the measure of total inflation in the economy, reflecting price changes across a wide range of sectors such as food, energy, transport, housing.

7. Indices such as the Consumer Price Index (CPI) are used to measure headline inflation.