The Reserve Bank of India (RBI) held the key repo rate unchanged for the seventh consecutive policy meeting on Friday as economic growth is forecast to remain strong, yet inflation is set to remain over the 4% target.

The Monetary Policy Committee (MPC) kept the main lending rate the same at 6.5%, aligned with expectations.

Between May 2022 and February 2023, the repo rate was increased by a total of 250 basis points, Reuters reports.

Strong growth allows room for monetary policy to stay focused on returning inflation to the RBI's target of 4%, according to a statement by central bank governor, Shaktikanta Das.

He added that monetary policy needs to stay actively disinflationary at this stage.

Five out of six members of the MPC voted in favour of the decision, whilst the 'withdrawal of accommodation' stance was retained with a five-vote majority.

According to the central bank, India's economy is forecast to grow by 7% in the 2025 fiscal year, the same as its previous forecast.

Das added that stronger rural demand, improved employment conditions and an ongoing rally in the country's manufacturing sector should bolster consumer demand.

Furthermore, retail inflation for 2024/25 is forecast at 4.5%, the RBI governor added, with volatile food prices deemed an ongoing risk.

"Our effort is to ensure inflation aligns to target on a sustained basis," Das stated

Additionally, there was little change for the Rupee against the Dollar at the time of writing at 83.4150, marginally above an all-time low hit on Thursday, whilst bond yields increased 2 basis points to 7.1217%.

"We do not see much scope for any rate easing until the second quarter of 2024-25," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.